Mezzanine capital

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Mezzanine capital or mezzanine financing ( Italian mezzo 'half') describes as a collective term types of financing that, in their legal and economic form, represent a mixed form between equity and debt capital . In the classic variant, economic or balance sheet equity is added to a company without granting the investors voting or influence rights or residual claims like the real shareholders .

description

Mezzanine forms of financing are a mixture of equity and debt functions. Mezzanine capital can be given in a manner similar to equity (so-called equity mezzanine ) in the form of profit participation rights , certificated profit participation certificates or silent participations . Convertible bonds and bonds with warrants are also possible . Mezzanine capital, which is granted in the form of subordinated , participatory loans or shareholder loans , on the other hand, has the character of outside capital and is usually to be recognized in the balance sheet as a liability (so-called debt mezzanine ). The respective contract definition defines whether the mezzanine product is equity or debt-like.

Classic lenders , such as banks, calculate the mezzanine i. d. Usually to the economic equity , as it does not reduce the potentially available collateral. As a result, after taking out mezzanine capital, external financing can be increased, which in turn allows more favorable mixed financing (see below).

The design options for mezzanine capital are so variable that flexible financing solutions are possible, especially with regard to terms (usually between 7 and 10 years), termination options (e.g. if the mezzanine recipient subsequently has a previously defined equity ratio falls below), interest rate, profit and loss regulations or repayment modalities. However, it is precisely these points that determine how the invested capital is viewed under liability and tax law (equity or debt capital). Securitized securities that can be traded on a public market ( stock exchange ) (in Germany e.g. profit participation certificates ) are subject to prospectus liability and approval by the Federal Financial Supervisory Authority ( BaFin ).

Mezzanine donors have different shareholder backgrounds and can be private equity companies, banks and special mezzanine funds. In the years 2004 to 2007 (until the financial crisis from 2007 ), various banks offered so-called program mezzanine products to German SMEs as a financing component, then bundled these SME tranches in various portfolios and sold these bundled mezzanine financings to institutional investors.

meaning

Mezzanine financing became increasingly important, especially for medium-sized companies , due to the increasingly cautious lending by banks as a result of Basel II . The higher-interest mezzanine is ideally complemented by lower-interest classic loans. Example: By including mezzanine z. B. in the amount of 1 million euros, the economic equity is increased accordingly, so that additional corporate loans in the amount of 2 million euros can be presented (mixed financing).

Mezzanine financing is particularly important in the area of private equity for leveraged buy-outs , where it is usually an important part of the capital structure , as it allows investors to keep the equity investment low.

Since the financial crisis of 2008/9, mezzanine providers in Germany have mostly been holding companies that offer both equity and mezzanine, e.g. B. VR Equity Partners or BayBG, or special mezzanine funds, which are only active in the market in very small numbers due to the low interest rates and the good economic situation, as the interest claim of this equity-like product is difficult to enforce with customers, i.e. the market is manageable.

Accounting

Accounting HGB

In accounting according to the German Commercial Code , as usual, one is guided by the principle of caution that prevails there . Accordingly, accounting in equity is only possible if the capital made available has a "sufficient" liability quality. This is only given (as of 1994) if the following four requirements are cumulatively met:

Subordination
In the event of insolvency or liquidation, a repayment claim may only be made after all other creditors whose invested capital was not classified as equity have been served. It must therefore be available as an "adhesive substance".
Loss participation up to the full amount
Losses incurred may only be offset against components of the equity capital on the balance sheet, which is particularly protected from distribution, when the profit participation capital (or similar) has been used up.
Success-related remuneration
Remuneration for the capital made available is only made if the equity does not fall below the specially protected equity components.
Longer term of the provision of capital
The capital must be made available for a longer period of time during which repayment is excluded for the issuer and investor. The HFA of the Institut der Wirtschaftsprüfer does not comment on how long the capital must be made available in order to be classified as "long-term". However, at least five years are required. It is not necessary to reclassify equity into debt capital during the term. This means that the remaining term is irrelevant when categorizing as equity or debt.

Accounting IFRS

In international accounting according to the International Financial Reporting Standards (IFRS), formerly International Accounting Standards ( IAS ), the allocation to equity or debt is based on the actual contract structure. The trend looks IAS 32 - Financial Instruments: Disclosure and Presentation (Financial Instruments: Disclosure and Presentation) but rather an allocation to loan capital, which can lead to high earnings volatility.

literature

  • Häger / Elkemann: Mezzanine financing instruments. Erich Schmidt Verlag Berlin, 2nd edition 2007, ISBN 3-503-09367-2 .
  • Werner: Mezzanine capital - Increase the equity ratio with mezzanine financing Bank-Verlag Cologne, 2nd edition 2007, ISBN 3-86556-135-7
  • Müller-Känel: Mezzanine Finance - New Perspectives in Corporate Finance. 2nd edition, Paul Haupt Verlag Bern, Stuttgart, Vienna, 2004, ISBN 3-258-06819-4 .
  • Bösl / Sommer: Mezzanine financing , Verlag CH Beck, Munich, 2006, ISBN 3-406-54593-9
  • Dürr, Ulrike: Mezzanine capital in HGB and IFRS accounting , Erich Schmidt Verlag, Berlin 2007, ISBN 978-3-503-10031-6
  • Schrecker, Tilman: Mezzanine Capital in Commercial and Tax Law, Duncker & Humblot, Berlin, 2012, ISBN 978-3-428-13692-6

Individual evidence

  1. ↑ Annual review of mezzanine: stagnation to decline / subprime crisis makes refinancing of program mezzanine more difficult ( Memento from June 15, 2009 in the Internet Archive )
  2. ^ Institut der Wirtschaftsprüfer, HFA 1/1994: On the treatment of profit-sharing rights in the annual financial statements of corporations.