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Structured Finance

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Each of these structured financing options provides unique benefits and risk profiles, making them suitable for different types of borrowers and investors depending on their financial goals and risk tolerance.

Each of these structured financing options provides unique benefits and risk profiles, making them suitable for different types of borrowers and investors depending on their financial goals and risk tolerance.

  • Mezzanine
Mezzanine financing is a type of structured financing that sits between senior debt and equity in the capital stack. It is often used to bridge the gap between the amount a borrower can secure from traditional lenders (such as banks) and the total capital needed for a project or investment. Mezzanine financing is typically provided by private investors or specialized funds. It is considered riskier than senior debt but offers more security than pure equity. In exchange for taking on higher risk, mezzanine lenders usually receive a higher interest rate and may also receive an equity stake in the project or company. Mezzanine financing is popular in real estate and private equity transactions.
  • Second Mortgages

Second mortgages refer to a form of secured loan that is subordinate to the first mortgage on a property. In the event of default, the first mortgage takes precedence over the second mortgage in terms of repayment priority. Second mortgages are often used by borrowers to access additional funds based on the equity they have built up in their property. These loans typically carry higher interest rates than first mortgages, reflecting the increased risk to the lender. Second mortgages can be a viable option for homeowners or property investors seeking to tap into their property’s equity for various purposes, such as home renovations, debt consolidation, or investment opportunities.

  • Preferred Equity

Preferred equity is a type of financing that blends features of both equity and debt. Unlike common equity, preferred equity investors receive fixed dividends or preferred distributions before any dividends are paid to common shareholders. Preferred equity investors may also have additional rights and preferences in the event of a company’s liquidation or sale. However, unlike debt, preferred equity does not come with a fixed maturity date and may have more flexible repayment terms. Preferred equity is often utilized in real estate investments and private equity deals, providing investors with an attractive risk-return profile.

  • A/B Notes
A/B notes, also known as A/B loan structures, are a method of dividing a loan into two separate portions to meet different risk appetites of investors. The A-note represents the senior portion of the loan, which is less risky and usually has a lower interest rate. It is typically held by traditional lenders or institutional investors. The B-note represents the subordinated or mezzanine portion of the loan, which carries higher risk and often a higher interest rate. It is typically held by private investors or specialized funds seeking higher returns. This structure allows lenders to participate in financing deals while tailoring their exposure to risk and return.
  • Credit Tenant Lease Financing

Credit Tenant Lease (CTL) financing is a structured financing method primarily used for commercial real estate transactions involving properties leased to high-credit-quality tenants, such as investment-grade corporations or government entities. In CTL financing, the lender’s primary source of repayment is the lease payments from the tenant. The lease is structured as a net lease, meaning the tenant is responsible for property taxes, insurance, and maintenance costs, in addition to rent. CTL financing is popular among investors seeking stable and predictable cash flows, as it offers a low-risk investment opportunity backed by the creditworthiness of the tenant.