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Mezzanine Debt Term Sheet

Mezzanine Debt Term Sheet Template for India

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Key Requirements PROMPT example:

Mezzanine Debt Term Sheet

"I need a Mezzanine Debt Term Sheet for a Series C technology company seeking INR 200 crore growth capital, with potential conversion rights and board observer seat for the lender, to be closed by March 2025."

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Document background
The Mezzanine Debt Term Sheet is a preliminary document used in Indian financing transactions to outline the key terms of a hybrid financing arrangement that sits between senior debt and equity in the capital structure. This document is typically used when companies require growth capital, acquisition financing, or restructuring funding, and traditional senior debt or pure equity solutions are not optimal. The term sheet captures essential commercial terms, conditions, and structural elements of the proposed financing while ensuring compliance with Indian regulatory requirements, including those from the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). It serves as a roadmap for the transaction and forms the basis for detailed legal documentation, making it a crucial document in the early stages of mezzanine financing negotiations.
Suggested Sections

1. Parties: Identification of the borrower, lender(s), and any guarantors

2. Background: Brief description of the transaction context and purpose of the mezzanine financing

3. Definitions: Key terms used throughout the term sheet

4. Facility Amount: Size of the mezzanine debt facility

5. Purpose: Specified use of proceeds

6. Interest Rate and Payment: Interest rate structure, payment frequency, and calculation methodology

7. Term and Repayment: Facility duration and repayment terms including amortization schedule if applicable

8. Security Package: Description of collateral and security structure

9. Ranking and Subordination: Priority ranking of the mezzanine debt relative to other debt

10. Key Covenants: Financial and non-financial covenants

11. Conditions Precedent: Conditions to be satisfied before drawdown

12. Events of Default: Circumstances that trigger default

13. Fees: All applicable fees including arrangement, commitment, and exit fees

14. Governing Law: Applicable law and jurisdiction

Optional Sections

1. Equity Kickers: Terms of any equity participation rights, used when the deal includes warrants or conversion rights

2. Foreign Investment Provisions: Special provisions required for foreign lenders, included when there are overseas investors

3. Intercreditor Provisions: Key terms of relationship with other lenders, included when there are multiple debt facilities

4. Board Representation: Rights of lender to board seat or observer status, included when lender requires governance rights

5. Exit Mechanisms: Specific provisions regarding exit options, included when deal has defined exit timeline

6. Tax Considerations: Special tax-related provisions, included when structure has specific tax implications

7. Regulatory Approvals: List of required regulatory approvals, included when deal requires specific regulatory clearances

Suggested Schedules

1. Sources and Uses: Detailed breakdown of funding sources and intended use of proceeds

2. Cap Table: Pre and post-transaction capitalization table, particularly relevant if equity features are included

3. Security Package Details: Detailed list of assets comprising the security package

4. Financial Covenants Calculations: Definitions and calculation methodologies for financial covenants

5. Key Milestones: Timeline of key dates and deliverables for transaction closing

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓƵ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
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Relevant Roles

Chief Financial Officer

Finance Director

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