Mezzanine market set for recovery

The long-lasting unfavourable economic cycle in the mezzanine market showed signs of improvement in late 2003 and early 2004. Recent statistics, supplied by specialist mezzanine provider Nordic Mezzanine, have indicated a recovery in the use of mezzanine capital in Europe in 2003. This suggests that the number of secondary buyouts and refinancings are increasing. In the near future the mezzanine market is expected to face many challenges. Firstly, it seems that the number of institutions providing mezzanine financing is increasing. This involves not only banks but also new European mezzanine fund initiative trying to tap into the market. Secondly, there is evidence to suggest that warrantless mezzanine is gaining ground and that some banks in particular are keen to push this product by sacrificing the potential equity upside and compromising the overall downside. Finally, Nordic Mezzanine commented that the leverage on deals has been rising recently.

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• France