EB-5 Capital Stack: Senior Loan vs Mezzanine vs Equity

Project marketing often says "senior secured" or "first lien" — but the capital stack is the structural fact that survives marketing. In a workout, recovery follows strict legal priority, and EB-5 investors are paid only after every higher tranche is satisfied.

• •Senior secured loan (top of stack): first in repayment priority, secured by JCE assets. Best protection. Requires UCC-1 perfection of the security interest to be enforceable against competing creditors.
• •Mezzanine debt (middle): sits between senior debt and equity. Higher yield, but recovery depends on senior debt being fully satisfied AND remaining project value being enough to cover the mezz tranche.
• •Equity (bottom): highest theoretical upside, last in recovery. EB-5 funds deployed as equity bear full downside exposure.
• •Hybrid structures: preferred equity, convertible debt, etc. Read the PPM's repayment-priority section, not the marketing.
• •Why this matters for EB-5: the at-risk requirement permits any of these structures, but they have very different downside profiles. A "senior secured" structure with UCC-1 perfection materially lowers EB-5 investor downside relative to mezz or equity.

When a project says "senior secured" but the offering documents put EB-5 below the bank senior loan in the actual capital stack, the senior label is misleading. Always confirm with a securities lawyer.