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Mezzanine Loan Agreement for Canada

Mezzanine Loan Agreement Template for Canada

A comprehensive financing agreement governed by Canadian law that establishes the terms and conditions for a mezzanine loan facility, which sits between senior debt and equity in the capital structure. The agreement details the loan amount, interest terms (often including payment-in-kind options), security package, subordination provisions, covenants, and potentially equity-like features such as warrants or conversion rights. It incorporates specific Canadian legal requirements, including compliance with the Interest Act, Personal Property Security Act requirements, and relevant provincial securities regulations where equity components are involved.

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Mezzanine Loan Agreement

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What is a Mezzanine Loan Agreement?

The Mezzanine Loan Agreement is utilized when a company requires financing that exceeds what traditional senior lenders are willing to provide, but where pure equity investment is not desired or appropriate. This hybrid financing instrument, governed by Canadian federal and provincial laws, bridges the gap between senior debt and equity financing. The document establishes the terms of the mezzanine facility, including interest rates (often with PIK components), repayment terms, subordination to senior debt, security package, and any equity participation rights. It is particularly valuable in acquisition financing, growth capital scenarios, or real estate development. The agreement must comply with Canadian banking regulations, securities laws (especially when equity features are included), and provincial security registration requirements. The document typically works in conjunction with intercreditor agreements and security documents to create a comprehensive financing structure.

What sections should be included in a Mezzanine Loan Agreement?

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

2. Background: Context of the mezzanine financing and its relationship to other debt facilities

3. Definitions: Comprehensive definitions including financial terms, calculation methodologies, and related agreements

4. The Facility: Details of the loan amount, purpose, and drawdown conditions

5. Interest and Fees: Interest calculation, payment dates, default interest, and any PIK provisions

6. Repayment Terms: Principal repayment schedule, prepayment provisions, and make-whole amounts

7. Subordination: Relationship with senior debt and intercreditor provisions

8. Security: Description of security package and ranking

9. Representations and Warranties: Standard and transaction-specific representations

10. Covenants: Financial and operational covenants, information requirements

11. Events of Default: Default triggers and their consequences

12. Remedies: Enforcement rights and procedures

13. Assignments and Transfers: Transfer restrictions and mechanics

14. General Provisions: Standard boilerplate provisions including notices, amendments, governing law

What sections are optional to include in a Mezzanine Loan Agreement?

1. Equity Participation: Required if the mezzanine facility includes warrants or conversion rights

2. Board Observer Rights: Include if lender has rights to appoint board observers

3. Exit Rights: Include if there are specific provisions regarding change of control or IPO

4. Management Rights: Required if lender has specific rights regarding management decisions

5. Tax Provisions: Detailed section needed if complex tax structures or international parties involved

6. Currency Provisions: Required for multi-currency facilities

7. Intercreditor Provisions: Detailed section needed if not covered in separate intercreditor agreement

What schedules should be included in a Mezzanine Loan Agreement?

1. Schedule 1 - Drawdown Notice: Form of drawdown request

2. Schedule 2 - Conditions Precedent: List of required documents and conditions for closing

3. Schedule 3 - Security Documents: List and forms of security documents

4. Schedule 4 - Financial Covenants: Detailed calculations and definitions for financial covenants

5. Schedule 5 - Warranties: Detailed representations and warranties

6. Schedule 6 - Permitted Liens: List of existing and permitted security interests

7. Schedule 7 - Form of Compliance Certificate: Template for periodic compliance reporting

8. Schedule 8 - Existing Indebtedness: List of borrower's existing debt obligations

9. Appendix A - Warrant Terms: Terms of any warrant instruments (if applicable)

10. Appendix B - Conversion Rights: Details of conversion mechanics (if applicable)

Authors

Alex Denne

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

Jurisdiction

Canada

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
































































































Clauses


















































Relevant Industries

Private Equity

Real Estate

Manufacturing

Technology

Healthcare

Retail

Infrastructure

Energy

Mining

Telecommunications

Financial Services

Professional Services

Construction

Agriculture

Relevant Teams

Legal

Finance

Treasury

Corporate Development

Risk Management

Compliance

Credit

Investment

Operations

Corporate Secretariat

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Corporate Lawyer

Legal Counsel

Investment Manager

Private Equity Partner

Debt Fund Manager

Corporate Development Director

Financial Controller

Risk Manager

Compliance Officer

Credit Officer

Investment Banker

Transaction Manager

Industries








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