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Hi Loki-

I enjoyed your contributions to this board in the past.

Do you have a CUSIP number for these GO bonds? Or are they just a possible future issue?

Mezzanine financing is high risk and often an equity piece is part of the deal. Personally, I would expect a pretty good reward for putting money into a highly speculative venture which is what mezzanine finance does. Equity is always last in a liquidation, other than interests that have been subordinated for bad behavior.

If you want to learn about mezzanine lending, start with Einhorn's book about Allied Capital. But remember that he was wrong about the value of the portfolio when he first went short.

To answer one of your specific questions, if the balloon can't be met (i.e. refinanced) it's workout time or bankruptcy.

You can't really say anything more specific without a lot more details than you have provided. Who would know what the personal guarantee is worth without access to the financials of the guarantor?
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