Document background
The Mezzanine Debt Term Sheet is a crucial preliminary document used in South African financing transactions when companies seek hybrid financing solutions that offer more flexibility than traditional senior debt but are less dilutive than pure equity. This document is typically employed during the growth phase of companies, acquisitions, or major capital expenditure projects where traditional bank financing alone is insufficient. The term sheet outlines the proposed terms of the mezzanine facility, including the quantum, pricing (often including both cash and PIK interest components), security package, and any equity-linked elements such as warrants or conversion rights. It serves as the basis for negotiation and eventual preparation of final documentation, ensuring alignment between the mezzanine lender and borrower while considering the South African regulatory environment, including Companies Act requirements and financial sector regulations.
