Question

One of the advantages of mezzanine debt, from the investor perspective, is that there are borrower restrictions. Typically, mezzanine lenders would have the right to approve all of the following except:

Select one:

a. management-by-law changes

b. dividend payments

c. additional debt issuance

d. acquisitions

Answer 1

Dividend payments are related to the equity shareholders and they are decided by the board of directors and approved in the General meeting so they are approved by the shareholders who are equity shareholders in nature and they cannot be overridden by any other lenders not even mezzanine lenders.

so mezzanine debt can control acquisition or additional debt issuance and management by law changes but cannot control the dividend payments of a company.

Correct answer is option (B) dividend payments