28 January 2008 21:44 [Source: ICIS news]
By Joe Chang
NEW YORK (ICIS news)--The global credit crisis has not choked off mezzanine financing, which is still available for companies seeking to finance M&A deals, one investment banker said on Monday.
“Mezzanine financing is widely available from nonbank financial institutions,” said Jean Cayanni, senior managing director and head of the chemicals practice and capital raising at RSM EquiCo, an investment bank based in Costa Mesa, California, roughly 40 miles (64 km) south of Los Angeles.
Mezzanine debt typically carries a higher interest rate than senior debt, and the lender often gets an “equity kicker” - an equity stake in company to which it is lending.
Mezzanine lenders had been squeezed out of the white hot M&A market in recent years, as senior debt was widely available from aggressive lenders, lessening the need to go to second-tier mezzanine financing, Cayanni said.
However, with the onset of the credit crisis, banks are less willing to provide senior debt, especially for large deals.
“Banks are afraid of syndication risk,” Cayanni said. “If they’re financing a multibillion dollar deal, they don’t want to be stuck with the debt.”
“Many mezzanine lenders have raised funds in the past two years, but have not been able to put them to use because banks have been very aggressive with senior debt,” he said.
In the chemical industry, Cayanni sees the M&A middle market being active in 2008, but with strategic buyers dominating the field.
“Strategic buyers are going to have the upper hand,” he said. “They have all sorts of dry powder and can bid on assets knowing that private equity could have difficulty getting funding.”
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections