Mezzanine Debt
Definition
Mezzanine debt is financing that sits between senior debt and equity in a company’s capital structure: it is repaid after the senior lenders but before shareholders. It carries higher interest, and often warrants or conversion rights, to pay for that extra risk.
In practice
In buyouts, mezzanine fills the gap when senior lenders will not stretch far enough and the sponsor does not want to write a bigger equity check. It is expensive money, but it is also patient money, and it can be the difference between a deal closing and dying.