Question about mezzanine loan cushions in Texas

I was reviewing a deal in Austin where the mezzanine lender wanted a 15% cushion on the enterprise value, but the senior lender was only allowing 10%. I kept seeing people treat that cushion like a fixed number, but it really depends on how the waterfalls are written. We ended up renegotiating the intercreditor agreement because the trigger events were stacked against us. Is it common to negotiate the cushion down when you add a third layer of debt?

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ellis.mia18d ago

Whoa, that's a super tight squeeze! I actually read a piece recently about how those cushion numbers get way more flexible once you stack layers, so it's not just you. We saw something similar in a deal where the mezz guy wanted 12% but the senior lender basically laughed until we redrew the waterfall triggers.