We continue our discussion this week on why private mezzanine is going from strength to strength amid current economic and market conditions.

“We did zero mezzanine deals last year,” one junior capital provider told us. “This year we’ve already done half-a-dozen. We’re getting calls from sponsors that don’t typically use mezz. Deal flow is up significantly, particularly for PIK deals given what’s going on in the senior market. We’re trying to pick our spots. If the use is just to pay senior cash interest, that’s an easy no.”

“Our high-water mark for investment activity occurred during the peak of aggressive senior debt market conditions, and we have experienced an uninterrupted growth trajectory in junior capital activity since 2011,” our Head of Private Equity and Junior Capital, Jason Strife, told us. “Middle market deal flow was soft versus the same period last year. However, our closed deals were up over 20%. Despite decline in buyout activity and broader M&A activity, we had many unique opportunities to capitalize on the market’s dislocation, with high quality businesses.”