What are the main advantages of trust mezzanine financing?

Mezzanine financing refers to a form of financing that is somewhere between senior debt and equity financing in terms of risk and return. Mezzanine financing generally takes the form of a subordinated loan, but it can also take the form of convertible notes or preferred shares. For companies and referrers, mezzanine investments typically offer a very flexible form of longer-term financing that is significantly less dilutive than ** and can be adjusted to suit specific needs.

The payment of mezzanine financing can also be determined based on the company's cash flow position. A mezzanine layer is a layer of leverage that is added between the priority and the inferior level. The end result is that the leverage is squared (significantly expanded), saving the inferior capital occupation.

Mezzanine financing has its own advantages, and its advantages are: 1. Benefits for borrowers and their shareholders: it is a very flexible financing method, which can be adjusted according to the special requirements of the raised funds.

For borrowers and their shareholders, it is attractive in the following ways: long-term financing; Adjustable structure; Less restrictive; Lower cost than equity financing. 2. Benefits for mezzanine financing providers:

The benefits for providers are also the main features that distinguish mezzanine investments from typical private equity investments: investments that are less risky than equity; The certainty of withdrawal is greater; Current yield.

Mezzanine financing is a type of unsecured, long-term debt that comes with an investor's right to subscribe to the financier's equity. Mezzanine financing is only one type of subordinate debt, but it is often used synonymously with subordinate debt. The interest rate level for mezzanine financing is generally between 10% and 15%, and the target return for investors is 20% to 30%.

Generally speaking, the lower the mezzanine rate, the more equity options there are.

In layman's terms, it is to provide financing parties with funds between equity and bonds, usually to fill some of the funding gaps that are still insufficient after considering equity funds and ordinary debt funds, so the mezzanine ** is still essentially a kind of lending funds, which are located after loans in the debt repayment order of enterprises.

Mezzanine financing is a technical means of financing, which in many cases plays the role of "bridge" financing, and the general term is one to two years. For example, in real estate mezzanine financing, the capital needs between the time the enterprise obtains the land and the development loan is met by the mezzanine financing.

Mezzanine investment is also a form of investment in the private equity market, which is the evolution and expansion of traditional venture capital. In Europe and the United States, there is a dedicated mezzanine fund**. If as much equity and senior debt is used to finance but there is still a large funding gap, mezzanine financing is the time to provide debt funding at a higher interest rate than senior debt but at the same time taking on higher risk.

Since mezzanine financing is often used to help companies improve their asset structure and rapidly increase turnover, the issuance of this form of subordinated debt is often accompanied by the right to subscribe for equity when the company goes public or is acquired.

The trust company draws on the concept of mezzanine financing in Europe and the United States, grafts mezzanine financing to the trust product of collective capital, and launches an innovative collective capital trust product featuring mezzanine financing.

A mezzanine financing trust is a financing method between senior debt and equity, which refers to the process by which a company or project finances funds through the situation of mezzanine capital. The reason why it is called mezzanine is that from the perspective of capital costs, the financing cost of mezzanine financing is lower than that of equity financing, such as the fixed interest rate of debt can be adopted, which reflects the advantages of debt to the equity holder.

Mezzanine financing trust model.

The first is equity repurchase, which is to raise funds to invest in the equity of real estate companies, and then repurchase them, which is relatively low-level. The second is the real estate company's loan on the one hand, and on the other hand, it will give part of the equity and equity beneficiary rights to the trust company, which is the "loan + trust company + equity pledge" model. The third type is a loan plus stock option, where the loan is repaid as a senior bond.

The fourth model is multi-layered innovation.

Financing trust refers to the loan of entrusted funds (or assets) to the demander of funds (or assets) in the form of financing (such as loan hall group, financial leasing, etc.). Different from the equity relationship generated by the investment trust, the financing trust generates the creditor's rights relationship.

Financing trusts generate a debt relationship, which lends trust funds to customers with capital needs, such as real estate companies, industrial and commercial enterprises, etc., and generally has specific investment projects for refinancing; Investment trusts produce equity relationships, which generally only have investment directions, but no specific investment content.

Financing trust refers to the financing demand of the capital demander as the driving factor and business starting point, the purpose of the trust is to seek a fixed return on the trust assets, and the trust assets are mainly used in specific projects that have been specified in advance before the establishment of the trust. In this type of business, the trust company is mainly responsible for recommending specific projects to the settlor and beneficiaries, and requesting financing principal and interest from specific projects. It includes trust loans, equity or bureau financing trusts with repurchase, repurchase options or guarantee arrangements, credit asset transfer trusts, etc.

First, it has the advantage of a large functional span, and the trust has both financing and investment functions; It also has the function of resource integration: organically connecting the three major markets of currency, capital and industry; In addition, it also has the function of property management: it provides a variety of asset management and value-added services for various institutions, enterprises and natural persons.

Second, the use of trust funds is extensive, diversified, integrated and innovative, which can not only lend to enterprises, but also carry out equity investment, financial advisory, mergers and acquisitions and other investment banking business; It involves the reform of state-owned enterprises, infrastructure construction, energy development, real estate development and other fields.

Third, trust and other financing methods have strong complementary advantages and linkage management capabilities, trust business and banks, **, insurance and guarantee institutions have a broad space for cooperation.

Fourth, the trust property is independent, and the trust property is different from other property for which the settlor has not established a trust, and has the function of bankruptcy isolation.

In addition, through the form of loans or equity, the trust can also solve the problem of insufficient project capital, in the current trust financing, there are a large number of infrastructure trusts, for the first and enterprise infrastructure investment projects to provide financial support.

1. The interest rate is higher than that of the bank. The general financing cost is around 7-10.

2. The trust company's due diligence is detailed. Generally, the trust manager spends about a month doing due diligence 3, and the fundraising speed is fast. Trust customers are all high-net-worth individuals, and hundreds of millions of trust project funds can be completed in a few days.

4. High qualification requirements. The trust manager will ask the company to make a lot of risk control arrangements. Asset mortgage, equity pledge, land mortgage, accounts receivable pledge, joint and several liability guarantee of the actual controller, etc.