The Mezzanine As Financing Option

With a combination of debt and equity transfer, companies can diversify their sources of credit and improve the return on their investments.

Thursday, December 12, 2013

This type of financing gives the creditor the option of converting debt to equity, ie, they can become an equity partner in a company or access the dividends of shares in the event of default.

This is how Roberto Ponce explains it in his article in Estrategiaynegocios.net, adding that "mezzanine is subordinated debt structure, unsecured and with ample grace periods, allowing companies to conserve cash and use it for aggressive growth."

The article goes on to say: "Being a very flexible instrument it can be adapted to the needs of business, such as deferring interest payments, or achieve lower interest but adding a percentage of the profits (ie, if there are no profits then the payment is lower).



More on this topic

Stock Market at a Disadvantage

August 2018

The new tax reform proposal being discussed in Costa Rica raises capital gains tax from 8% to 15%, and also excludes recognising as a debt deposits made by issuers in the securities market.

In the view of the National Stock Exchange (BNV), not recognizing deposits made in the stock market as debt leaves it at a clear disadvantage, compared to banks, as a source of financing for companies. Not only does it compromise access to investors' savings, it also significantly limits companies and individuals investment options.

$300 million to Fund Spanish Companies in Latin America

April 2013

The Development Bank of Latin America has provided a loan of $300 million to the Spanish Official Credit Institute for promoting business development between Spain and Latin America.

From a press release issued by the Development Bank of Latin America (CAF):

CAF (Development Bank of Latin America) and the Official Credit Institute (ICO) today signed the granting of a loan for $300 million for the financing and provision of guarantees for Spanish and Latin American companies.

Alternatives to Bank Loans

April 2013

Central American financial institutions are offering their customers new financing alternatives.

The firm Invermaster has indicated that some seventy banks have $500 million to invest in companies in the region.

"One alternative that has gained importance, according to Invermaster, is 'mezzanine financing', an intermediate instrument between traditional debt and equity investment.

Multibank Joins IFC Program

July 2009

Multibank joins IFC Program to expand trade financing for panamanian businesses.

IFC, a member of the World Bank Group, announced that Multibank today became the first issuing bank in Panama to join IFC’s Global Trade Finance Program to improve access to finance for local importers and exporters and entry to new markets.

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