Specialty Chemicals Mezzanine Debt & Capital Stack: An Independent Sponsor's Counsel
Securities and M&A counsel for independent sponsors structuring specialty chemicals transactions, from LOI to close to the capital markets that open up afterward.
Specialty Chemicals deals in the lower middle market run a specific playbook. Mezzanine Debt & Capital Stack is where the structure either holds or starts to leak.
The typical specialty chemicals platform sits at $15M to $200M EV with EBITDA in the $3M to $28M range. The thesis runs on niche formulator or contract manufacturing buy-up. The IP lives in the formulator's head as often as in the company. Structure for that risk explicitly.
How Mezzanine Debt & Capital Stack actually gets structured.
Target senior leverage at 3.0x to 3.5x EBITDA, mezzanine at 1.0x to 1.5x on top.
Negotiate an intercreditor agreement that does not throttle the operator.
Structure mezzanine with PIK toggle and warrants priced into the IRR model.
Confirm covenant headroom of at least 20 percent at close.
In specialty chemicals, layer in chemical inventory transfer filed as part of the Mezzanine Debt & Capital Stack workstream.
Letting the lender pick the intercreditor terms. Those terms decide what the operator can do on day 180.
"The capital stack is a contract, not a spreadsheet. Read every page of every term sheet."Jason Powell · Mezzanine Debt & Capital Stack
The deal is one thing. The capital that opens up after close is another.
The capital that opens up post-close, from refinancing to growth equity to strategic exit, runs through a small set of Wall Street relationships. That network is built in.
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An LOI on the desk, a specialty chemicals target, and a Mezzanine Debt & Capital Stack question worth a real conversation.
Twenty minutes of practitioner-grade input from a securities attorney whose first move is to read the deal, not the engagement letter.