Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert to an equity interest in the company in case of default, generally, after venture capital companies and other senior lenders are paid. Mezzanine debt has embedded equity instruments attached, often known as warrants, which increase the value of the subordinated debt and allow greater flexibility when dealing with bondholders. Mezzanine financing is frequently associated with acquisitions and buyouts, for which it may be used to prioritize new owners ahead of existing owners in case of bankruptcy. A mezzanine fund is a pool of capital that invests in mezzanine finance for acquisitions, growth, recapitalization, or management/leveraged buyouts. In the capital structure of a company, mezzanine finance is a hybrid between equity and debt. Mezzanine financing most commonly takes the form of preferred stock or subordinated and unsecured debt. It is treated as equity on the balance sheet. Mezzanine investors receive a rate of return (RoR) of 15% to 20%, which is higher than the RoR offered on traditional forms of debt financing (such as high-yield bonds and bank loans). This is because mezzanine capital is not as liquid as traditional debt finance and is subordinate to all other debt held by the company.