Mezzanine loans are a hybrid floating-rate product filling the funding gap between senior secured debt and equity. They are typically secured on the assets of the borrower albeit in a junior position to senior Secured Loans.
Mezzanine loans offer higher returns than senior Secured Loans to compensate for their more junior position in the capital structure. By carefully selecting investments for a diversified portfolio of Mezzanine loans, investors can benefit from these higher returns while mitigating the risk of loss.
Investors receive income through a combination of cash-pay coupon, PIK (“Payment-In-Kind”) and equity warrants.