Mezzanine/Subordinated Secured Debt
For companies that are negotiating a new or replacement credit facility, Newlight can facilitate the process by positioning a subordinated debt tranche tied to the borrower’s intellectual property portfolio.
In certain instances when companies are putting together a secured credit arrangement there may be a gap between what the conventional market is willing to advance and the financing needs of the borrower. In other cases there is a disconnect between the terms presented by the lender and the borrower’s expectations. Rather than accessing liquidity from equity investors, these gaps can often be bridged with the introduction of a mezzanine layer that carves out a security interest in the firm’s intellectual property portfolio that is fully subordinated to all other funded debt. In exchange for closing this structural gap and for taking a second priority interest, the mezzanine layer earns an interest rate commensurate with the risk and is awarded warrants.
Newlight’s ability to develop a mezzanine program that accurately assesses the collateral value of the intellectual property may be the difference between whether or not a deal closes.