Elephant Bar Restaurant: Mezzanine Financing

Case Solution

Susan Chaplinsky, Kristina Anderson
Darden School of Business ()

In November 2003, John Fruehwirth, director of Allied Capital, considered a $ 20 million mezzanine investment in growth capital for Elephant Bar, a California restaurant chain. Elephant Bar had had initial successes in California, but now Allied’s investment committee had to grapple with the question of whether the restaurant concept was strong enough to travel and become a national brand, or whether it was primarily a restaurant concept. California. And if the concept were robust enough to travel, could Allied Capital meet its underwriting standards? Since Elephant Bar is a company with aggressive growth plans, it is significantly riskier than traditional mezzanine investments. The case can be used in risk investing courses to illustrate another source of funding for young companies. Traditional mezzanine financing is often used to provide a portion of the financing for last minute investments, such as B. Leveraged purchases. The case can also be used in private equity courses to illustrate the outlook, risk mitigation strategies, and performance expectations of mezzanine investors. This case contains a teaching note and table available to registered faculty members.

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