Mezzanine financing meaning

Banking & Finance—May 2025 case round-up Nationwide Building Society v The Bank of New York Mellon, London Branch and another company [2025] EWHC 1046 (Comm) Debt capital markets—notes not admitted to listing Nationwide issued proceedings against its solicitors, A&O Shearman (A&O), claiming an approximate £83m tax detriment flowing from the omission to list notes, as pleaded by Nationwide. A&O, in response, pursued a contribution from BNY Mellon (BNY), contending that BNY contributed to the non-listing. The central point was whether a signing and closing agenda (normally a process checklist) could impose a binding duty on BNY to confirm that the notes were listed. The Commercial Court refused BNY’s application for summary judgment, concluding that A&O’s case had a realistic prospect of success at this stage. It determined that whether the transaction suite, including the agenda, created enforceable commitments required a fuller factual inquiry at trial. Skykomish Ltd v Gerald Eve LLP [2025] EWHC 1031 (Ch) Mezzanine financing and profit share—property development—purpose-built student accommodation—valuation of property—professional...

Borrowers can choose from a broad range of debt and capital structuring routes. Traditionally, senior debt (typically provided by banks) sat at the top, then mezzanine finance, followed by junior debt, each ranking ahead of unsecured creditors and shareholders/equity holders. After the 2007/8 credit crunch, businesses increasingly tapped capital markets and non-bank sources (eg private credit) to widen their funding, adding further layers of indebtedness. This Practice Note offers a straightforward overview of the different tiers of debt and security a restructuring lawyer may encounter. It outlines the financing layers and the forms of security commonly seen in practice by a restructuring lawyer. It also sketches how those tiers now sit together in practice. Capital structures and interplay between creditors Typically, external borrowings sit at the operating company (Opco) level. The Opcos own the core business assets (eg premises, key manufacturing equipment and valuable intellectual property), produce most of the profits, and lenders seek security over those assets. In some arrangements, high-value items such as intellectual property or...

Flexible loan structures In the wake of the financial crisis, mainstream bank lending pulled back, creating space for non-bank lenders (NBLs) such as insurers and real estate debt funds. Through 2012 and 2013, this gap allowed NBLs to consolidate their position and become established market participants. With confidence returning to the real estate investment market and banks re-entering from 2014, some NBLs, especially real estate debt funds, shifted up the risk spectrum away from the senior debt arena. This has produced a competitive environment for real estate debt across the capital stack. Banks, insurers and debt funds adopt different approaches, each targeting an optimum deal size, asset class and loan purpose. Four often-used flexible loan structures are: flexible senior loans stretched senior loans mezzanine loans preferred equity loans Flexible senior loans Banks are particularly active in this space alongside some insurers, although senior facilities have typically been provided at conservative loan-to-value, loan-to-gross development value and loan-to-cost ratios. Real estate...

Development of the Loan Market Association (LMA) documentation The initiative to create the LMA’s investment grade suite started in 1998, driven by market calls for a uniform syndicated facility agreement. The project emerged in response to market demand for a standardised syndicated facility agreement. Development of the LMA’s leveraged materials followed a comparable path: an initial facility agreement for leveraged acquisition finance transactions was released in 2004, with the recommended Intercreditor Agreement for leveraged acquisition finance (senior and mezzanine) issued in 2009. Since then, the LMA has continued to issue further precedents to reflect demand and changes in the market. There are now standard forms available for deals involving senior secured notes. In addition, there are forms for structures that feature both senior secured notes and high yield notes, recognising the significant volume of transactions financed in part or in full through high yield debt. The purpose behind both sets of LMA standard forms is to save time and cost by offering a position that reflects prevailing market practice...