T. V. Metz & Co. Mezzanine Capital

MEZZANINE CAPITAL

A Flexible Source of Growth Capital

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T.V. Metz & Co., LLC offers Mezzanine Financing, typically subordinated debt with warrants, to middle market companies that need capital. Mezzanine debt can be used for a number of purposes -- expansion, recapitalization, acquisitions, purchase of shareholder equity, or management buyouts. We seek to place $3 million to $35 million in mezzanine capital.

Mezzanine loans are structured to resemble equity rather than debt, and are based more upon cash flow than on underlying assets. This type of debt helps companies reduce their overall cost of capital.

Mezzanine financing is long-term capital at an affordable price. It bridges the gap between venture capital and senior debt. The risk level is intermediate -- between senior debt and equity financing.

Mezzanine capital is appropriate when:

Your bank will not lend beyond its current comfort level.
Equity investors want a greater equity percentage than you want to give up.
Your company is not viewed as growing rapidly enough for venture capital.

Mezzanine capital is flexible and can easily be tailored to a company's particular financial situation and concerns. Mezzanine financing is less expensive than a traditional equity investment. The equity dilution, which varies per transaction, is often less than half of what an equity placement would require.

To qualify for mezzanine capital a firm should have annual revenues of at least $8 million and operating cash flow of $1 million.

A typical mezzanine loan has a term of five to seven years with an interest rate of 10% to 15%. It usually includes a warrant to buy a small percentage of the company's equity.

Mezzanine investments are structured to achieve an Internal Rate of Return (IRR) in the range of 18 to 25 percent. The return is earned through a combination of current interest paid during the life of the loan and a deferred portion paid at maturity. The deferred portion consists of accrued interest or an equity participation, typically a warrant to purchase stock.

The major investors in the mezzanine market are mezzanine funds, private equity funds, venture capital funds, insurance companies, small business investment companies, and commercial banks.

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