What is senior and mezzanine debt in relation to property deals?

I read articles about big property development and investment deals and I am too embarrassed to ask anyone face to face the meaning of these terms!

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One Response to “What is senior and mezzanine debt in relation to property deals?”

  1. Veritas says:

    These are relatively modern terms. Mezzanine finance is where the loan agreement gives the lender, upon default by the borrower, a right to convert some, or all of the loan, into an equity stake. This gives the lender some control over the business to safeguard the outstanding loan from the possible actions of the borrower, which may not be in the lenders interest.

    Senior finance includes the release of equity from an asset, eg, a home.

    You will appreciate the above is simply to give a general idea of these types of financial instrument.

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