Mezzanine debt is a hybrid form of private credit that sits between senior (secured) debt and equity on a company’s balance sheet. It is unsecured but often includes an equity component, such as warrants, which allow the lender to convert a portion of the debt into equity.
This structure offers a middle ground: higher interest payments than senior debt to compensate for the higher risk, plus the potential for capital appreciation through the equity stake. Mezzanine funds are ideal for investors seeking high yield and a share of the growth without taking on pure equity risk.
