Mezzanine debt is commonly structured as junior senior debt-that is, the terms of the facilities agreement will be similar to those of the senior debt, but recognize that the mezzanine debt is lower in the priority of payment covenants. This is especially the case for any of the lenders' financial tests, which will need to reflect this lower priority.
Since this is junior debt, it is at a higher risk of default and so the risk premium or margin is higher- typically from 2 to 4 percent higher-than the senior tranche. Mezzanine debt often fills a gap in a financial structure when the amount of senior debt available is insufficient. This debt has so far not been a common feature in infrastructure lending but it may come to the fore now.