Chuck Morton, a partner in the Baltimore office, was quoted in a November 14, 2008 Baltimore Business Journal article about how the current economic crisis has caused typical lenders to hoard cash and freeze credit - causing borrowers to seek out more complex options such as mezzanine financing. In addition to Morton, the story quoted several Venable clients.
Mezzanine debt is typically more costly than large syndicated commercial bank loans, but unlike standard commercial loans, mezzanine lenders have more liquid assets and take equity stakes in borrowing companies. According to the article, mezzanine deals allow the investor to see a return before common stockholders, but after senior lenders to whom the companies owe money. Mezzanine loans can often be converted from debt into equity in the company.
"When the capital markets are seizing, it's a way for people to have enough of a return to encourage them to do something, but allowing them more protection than if they were just common investors," said Charles Morton.