Mezzanine debt occurs when a hybrid debt issue is subordinated to another debt issue. It’s typically used to bridge the gap between debt and equity. As a result, it can be considerably more expensive than the underlying debt. PACE financing can be used to replace a significant portion of the mezzanine debt requirement.
Other features include:
- PACE financing is significantly cheaper than mezzanine debt
- PACE financing can be used to minimize the amount of equity a project may require
- Mezzanine PACE financing may be “Off Balance Sheet”
- No personal or corporate guarantees