Mezzanine financing (Switzerland)

Swiss mezzanine financing refers to hybrid instruments positioned between senior debt and equity in Swiss acquisition or recapitalisation structures. The Swiss mezzanine market is served by specialist funds, private banks and family offices, with structures adapted to Swiss legal and tax requirements. Unlike France, the tax treatment of PIK interest in Switzerland has specific characteristics requiring analysis with Swiss tax advisors. In financial structuring, Swiss mezzanine is commonly used in SME buyouts where senior bank debt alone is insufficient to finance the full acquisition price at the desired leverage.

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Example: in a CHF 35.0 million Swiss LBO, the structure includes CHF 18.0 million senior bank debt (51%), CHF 7.0 million mezzanine (20%) and CHF 10.0 million equity (29%). The mezzanine tranche carries 7% cash coupon + 5% PIK and a 3% equity kicker — targeting a 16% total return for the mezzanine lender, structured to comply with Swiss thin capitalisation rules and PIK interest deductibility requirements.

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Hectelion structures Swiss mezzanine financing in its LBO and acquisition mandates, coordinating with Swiss tax advisors on PIK deductibility and thin capitalisation compliance.