Which type of financing is seen as a compromise between Term Loans and riskier subordination in LBOs?

The most suitable type of financing viewed as a compromise between term loans and riskier subordinated debt in leveraged buyouts (LBOs) is mezzanine debt. Mezzanine debt sits between senior secured debt (like term loans) and equity in the capital structure, offering higher returns than traditional loans due to its higher risk profile while being less risky than equity.

In the context of LBOs, mezzanine financing typically comes into play when a company has already maximized its senior debt capacity. Mezzanine debt can provide necessary leverage to fund acquisitions, helping to bridge the financing gap while allowing the company to avoid further diluting equity.

While senior notes represent a more secure form of debt than mezzanine financing, they do not carry the same risk and return profile that is characteristic of mezzanine debt. Therefore, they do not fit the description as effectively. Similarly, revolver debt refers to a flexible borrowing option that allows companies to draw and repay funding as needed, which is not a compromise, but rather a line of credit utilized for operational needs. Convertible debt, while it has elements of equity, does not specifically serve as a middle ground between term loans and subordinated debt due to its unique features that allow conversion into equity.

Overall,