Its advantage is that it can obtain equity under the premise that the senior debt borrower defaults. Then why did he break the contract? This is a good thing. Can he break the contract? Can it be the turn of mezzanine bonds-subordinated bonds?
Disadvantages:
Equity investors buy 10% shares, banks buy 50-60%, and mezzanine bonds buy 30-40%.
If successful, equity investors will earn more than 40%, mezzanine bonds will earn 20-30%, and bank income will be 2 points higher than interest rate. However, even if it is successful, the income will not reach 20%, and there may be no way. If it fails, the bank will pay back the money first, and the rest will be subordinated bonds. The key is how much is left.
Just chatting.
If this is a good project, equity investors may buy it all by themselves, not banks or subordinated bonds. It is because it is full of dangers that subprime bonds are introduced. If it fails, the risk will be borne by the subordinated bonds; If successful, the income will mainly flow to equity investors, and the income of subordinated bonds will only be a little higher than that of other bonds.