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Mezzanine

GROWTH THAT INSPIRES AFRICA

 

The advantage of Experience

 

Vantage Mezzanine is the largest and most experienced independent mezzanine funder on the African continent. Since 2006, Vantage has made thirty investments across three successive funds into ten African countries.

 

Why Mezzanine Debt?

 

Mezzanine Debt is an alternative source of risk capital that fills a funding shortfall where banks lack an appetite to lend, and where shareholders either lack cash equity to contribute and don’t wish to dilute their shareholdings.

 

Our Vantage Mezzanine funding product:

 

  • enables a business to make an acquisition or invest in expansion, or part-fund shareholders in acquiring additional equity in their company
  • through a flexible funding instrument
  • that is cheaper than equity
  • where shareholders don’t suffer heavy dilution of their existing equity stakes
  • and which can comfortably rank behind existing senior debt provided by banks

 

Types of Transactions:

 

  • Business expansion (any form of capital expenditure or growth funding)
  • Business acquisitions (e.g. acquiring a complementary business)
  • Share acquisitions (including black empowerment, management buy-ins and buy-outs)
  • Replacement capital (to buy out exiting shareholders)
  • Refinancing of existing debt
  • Other medium-term funding (we do not provide short-term working capital facilities)

 

Who we Target:

 

  • Entrepreneurs who need funds to expand their business or make an acquisition, but cannot raise bank debt and don’t want to dilute their shareholding
  • Management who want to acquire or increase their equity stake in the company
  • Buyers who want to part-fund a business/share acquisition
  • Black empowerment parties who want to acquire equity but do not have the full cheque

 

Suitable Companies:

 

  • Size: mid  to large-sized  corporates (enterprise value > R100m / $10m)
  • Track record: established operating businesses with a history of profit generation (typically EBITDA > R20m / $2m)
  • Sectors: all sectors other than highly volatile commodity exposures such as primary mining or primary agriculture
  • Operating in Africa
  • Greenfield or early stage businesses/projects only if there are strong risk mitigants in place (such as additional assets provided as security)

 

Key Funding Terms:

 

  • Investment size: R80m-R500m ($5-40m)
  • Structured as a subordinated interest-bearing loan plus a participating preference (“equity kicker”) which participates in a small % of the equity upside of the borrower
  • Tenor: 4 – 6 years
  • Pricing: an interest rate plus equity kicker which depends on the company risk and country in question
  • Back-ended repayment profile: only interest needs to be serviced (with some interest deferral permitted in certain circumstances) with a bullet capital repayment on maturity
  • 2nd lien security over assets, back-ranked to senior lenders

To see our full Mezzanine Fund portfolio in greater detail