France Épargne

Glossary

Mezzanine debt

Mezzanine debt is subordinated debt, repaid after senior debt, for which the lender obtains a higher return in exchange.

Definition

Mezzanine debt is subordinated debt that the company repays after senior debt. In exchange for this risk, the lender obtains a higher return than on senior debt. Its remuneration combines a cash coupon, capitalised interest (PIK) and, in some agreements, share warrants. According to the France Invest and Deloitte study of March 2026, private debt funds invested €1,338m in mezzanine and other subordinated debt across 68 transactions in France in 2025, or 9% of corporate debt amounts. These 68 transactions include 23 PIK transactions. The site’s Corporate mezzanine debt page presents this financing and its uses.

Worked example

A mid-cap company carrying €80m of senior debt adds €25m of mezzanine to finance an acquisition without diluting its shareholders. The agreement provides for 6% interest paid each year and 4% capitalised interest. After five years, capitalisation brings the principal owed to about €30.4m.

Points to check

  • The split between cash coupon and capitalised interest
  • Whether there are share warrants and the resulting dilution
  • The ranking and the rights set by the intercreditor agreement
  • The prepayment penalties

Contact

Request an introduction to lenders