Chuck Morton was quoted by Private Debt Investor on October 30, 2017, on how the U.S. mezzanine debt space is performing.
Investors don't appear to believe mezzanine debt is dead, and fund managers are clearly not turning away their money. But where is all this mezzanine capital going to be invested in a late-cycle, increasingly competitive credit market? Mezzanine fund managers are not the only ones in the mid-market looking for private debt-like risk with private equity-like returns these days, and senior and unitranche have proved to be fierce competition.
"My sense is that mezzanine activity is still robust," said Morton.
"But I think senior debt and unitranche are taking deals away from mezzanine," he added.
As terms on senior and unitranche deals loosen, this takes away opportunities for mezzanine lenders charging more for debt. "The mezzanine guys don't get invited to the party if they are targeting returns in the teens and a unitranche lender is targeting 8 percent returns," Morton adds.
Morton says there are more deal opportunities for mezzanine lenders in the lower mid-market.