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This article deals with two specific forms of long-term bank loans in the form of mezzanine capital, i.e. participating loans and subordinated loans. Mezzanine capital instruments are hybrid forms of capital, combining the features of debt and equity. These instruments represent an interesting opportunity to finance enterprises operating in capital-intensive industries, such as metallurgy. When making decisions about their incorporation in the corporate capital structure, it is necessary to consider their qualitative and quantitative characteristics. The authors aimed to characterize and evaluate participating loans and subordinated loans, and also to identify, structure and quantify the cost of these forms of private debt mezzanine within the context of classic bank loans in the current conditions of the Czech Republic. The paper characterizes participating loans and subordinated loans and evaluates their pros and cons from the qualitative point of view. The attention is also paid to the quantitative point of view – the cost of the above forms of capital. The paper specifies a detailed structure of the cost items, both as for the acquisition costs and as for the life-cycle costs of participating loans and subordinated loans. Subsequently, individual cost items are quantified from the point of view of the current conditions in the banking practice of the Czech Republic.

Keywords: Metallurgical enterprises, bank loans, mezzanine capital, private debt mezzanine, participating loans, subordinated loans, cost of capital

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