The appetite for mezzanine debt that flourished in 2008 has diminished with the return of high yield and senior debt availability. Higher on the capital structure, those forms of debt are cheaper, faster, and more flexible forms of deal finance. But at the height of the credit crunch, mezzanine was extremely popular, both to deal makers and investors.
In November 2007, fund managers had accumulated nearly $21 billion in mezzanine funds, up from $19.7 billion raised in all of 2006. That year Goldman Sachs raised the largest ever mezzanine fund, a $13 billion pool.
KKR in 2008 recruited Lee Stern, a managing director with GSO Capital Partners, to join the business.