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Mezzanine fund is a non-asset based borrowing and is positioned half way between debt and equity. It’s an alternative financing instrument for corporates who are planning ambitious buy-outs, turnarounds, expansions and non-asset-based borrowings.
Mezzanine Financing is an instrument that bridges the gap between the initial rounds of venture financing and acquisitions or refinancing.
This sort of financing is structured as a subordinate debt and warrants with a term of not more than three years.
This fund is for those companies that cannot borrow from the conventional sources like banks and FIIs and don’t have an asset cover to offer.
It is useful for start-ups and infrastructure projects. The exit route for the lender is pre-defined, and more importantly senior lenders can use Mezzanine as a buffer against risk.
ICICI Venture is in the process of closing India Advantage Fund VII (Mezzanine Fund 1), India’s first Mezzanine fund.
The target corpus of the fund is roughly USD 125 million.