Mezzanine Financings and the Rise of Non-Bank Lending
In 2025 we saw the continued appetite of sponsors to tap the private credit and non-bank lending market, particularly through the use of mezzanine and structurally subordinated financing structures.
Between the constrained debt sizing for senior project finance debt resulting from higher interest rate and inflationary environment, and the tightening of purse strings by equity investors more keenly focused on returns than ESG targets, the opportunity for mezzanine tranches in the capital structure for energy and infrastructure projects has continued to grow this year.
At the same time, the energy and infrastructure finance markets have seen the exponential growth of market share being taken by non-bank lenders, most notably the trading houses and private credit funds, looking for higher returns whilst offering the ability to write large tickets quickly, and take downside oriented risk( including equity like features) where needed. Trader-lenders( Vitol, Trafigura, Glencore) have taken larger roles in working capital and structured supply-linked facilities across upstream and midstream, often at speed and with embedded offtake. Meanwhile, private credit’ s share has compounded in European energy transition and regulated or contracted infrastructure— segments where long-dated, sometimes inflation-linked cashflows pair naturally with the duration and return targets of private credit vehicles.
Relative to the banks, traders and PC funds offer greater flexibility on structures— stapled debt plus equity solutions, delayed draw tranches for build outs, PIK toggles and bespoke covenants. Trader-lenders( Vitol, Trafigura, Glencore) have taken larger roles in working capital and structured supply-linked facilities across upstream and midstream, often at speed and with embedded offtake. Meanwhile, private credit’ s share has compounded in European energy transition and regulated or contracted infrastructure— segments where long-dated, sometimes inflation-linked cashflows pair naturally with the duration and return targets of private credit vehicles. That flexibility is one of the key attractions for sponsors, and a natural home for mezzanine tranches of debt, sitting between the traditional senior secured project financing and the pure equity from shareholders. In the UK where private credit funds are well established,
Bracewell continues to advise on the mezzanine debt platform for Vargronn and its noteholders GIC, EIG and Brookfield, and is supporting another UK Sponsor on the private placements of a mezzanine facility for a portfolio of renewables.
In Africa and other emerging markets, the increasing equivalence of the financing markets for energy and largescale infrastructure has seen private credit and non-bank lenders start to deploy financing structures previously reserved for the developed markets, with Bracewell advising on over $ 3 billion of financing from private credit and non-bank lenders across an array of power and energy infrastructure assets including mezzanine financings for CrossBoundary Energy, as well as advising the private credit funds and banks providing a mezzanine financing to Actis’ African portfolio company, Azura Power.
Recent Notable Matters
• Project Crested Crane— advising a non-bank lender on a $ 2 billion structurally subordinated facility for a portfolio of midstream infrastructure assets
• Project Navitas— advising CrossBoundary Energy on its mezzanine facilities for the development of its pan African mining focused portfolio
• Project Hyperion— advising the sponsor on the private placement of notes to private credit funds on a structurally subordinated mezzanine facility
• Project Hippo— advising the private credit funds and bank lenders on the structurally subordinated $ 1 billion debt platform for a pan-African portfolio of generation assets
The Year Ahead
We expect to see the continued growth of mezzanine facilities being raised with the accompanying growth in market share for debt capital being taken by non-bank lenders including trading houses and private credit funds. With the Bank of England now looking at stress testing the non-bank lending market, the year ahead looks to be an important inflection point for the continued growth of the segment. bracewell. com