Mezzanine finance has suffered in the recovering private
equity market. Intercreditor arrangements and stretched senior
lending are to blame.
Panelists at IFLRs European Private Equity Forum last
week examined the plight of junior creditors in the wave of
recent restructurings and fresh deals. And the clear message
was that mezzanine lenders have received no favours from
industry guidelines and aggressive senior lenders.
The Loan Market Associations (LMA) efforts to address
the mezzanine-senior lender balance in its standard-form
intercreditor agreement has achieved little. Mezzanine lenders
were consulted as part of the drafting process. But ten months
after its release, commentators say the document is still
overwhelmingly pro-senior creditor and the main improvements
have come from small changes in its user guide.
Its like having a document to protect a chicken
coop drafted by a pack of foxes, said panelist James
Davis, investment director with Intermediate Capital.