Mezzanine Financing in General

Mezzanine financing includes features of both equity and debt financing. Mezzanine financing instruments are occasionally also referred to as hybrids. For taxation and accounting purposes, however, financing instruments need to be categorized as either equity or debt, and the legal status of such instruments shall be either that of shares/equity or loans/debt. Mezzanine financing includes, for example, subordinated loans [6.1.3.4 Subordinated Loans (or Capital Loans)], convertible loans, option loans and wholly or partly non-voting shares [6.1.3.2 Non-Voting and Partly Non-Voting Shares]

In mezzanine financing, return on and repayment of invested capital is defined in the resolution regarding the financing instrument, depending on the specific instrument used as well as the financial position and profitability of the company. Among others, the company’s financing need and structure, as well as the risk / yield expectations of the investor are taken into account when tailoring the instruments.