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WHAT IS THE DIFFERENCE BETWEEN SENIOR AND JUNIOR MEZZANINE DEBT ?

April 26, 2017debt difference Junior Mezzanine Senior

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WHAT IS THE DIFFERENCE BETWEEN SENIOR AND JUNIOR MEZZANINE DEBT ?

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Junior mezzanine debt is subordinate to senior mezzanine debt. It therefore carries a higher risk and so its expected rate of return is also higher. Senior mezzanine debt expects a return of 15% (assuming an IRR of 25% on equity), whereas junior mezzanine debt expects around 17 to 19%. Remuneration of junior mezzanine debt is made up of capitalised interest and share warrants: unlike the remuneration on senior mezzanine debt, there is no cash interest component.