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the same in the event the pledged assets are not sufficient to satisfy the outstanding borrowings. In the event of a liquidation of a company, both the first lien and second lien loans would likely be repaid in full (along with trade and other general creditors) before the subordinated lenders receive any repayment of their obligations.
605:
obligations (i.e., general non-subordinated obligations) of the company, whether they are secured or unsecured. Although the second lien loan's security interest is subordinated to the first lien loan's interest in the pledged assets of the company, the ranking of first lien and second lien loans are
577:
The specific rights of the first lien and second lien lenders are established in the credit agreements between the borrower and each class of lender as well as in an intercreditor agreement. An intercreditor agreement is a contract between multiple classes of lenders where each class of lender agrees
630:
of a second lien loan are higher than those of the first lien secured loan of the same borrower because of increased risk for the lender that comes from a subordinated security interest. However, second lien debt can often reduce the overall cost of capital in a leveraged buyout transaction,
27:
578:
to specific procedures and preferences in the event of a bankruptcy or liquidation. Secured lenders will routinely require an intercreditor agreement to protect their interests before allowing a borrower to obtain a second lien loan.
719:
746:
714:
590:, second lien loans receive a pledge of specific assets of the borrower (e.g., buildings, land, equipment, intellectual property, receivables and other financial assets).
739:
567:, any additional proceeds from the sale of the pledged assets would then be made available to the second lien lenders as repayment of the second lien loan.
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563:
as repayment of their borrowings. To the extent that the value of the assets is sufficient to satisfy the company's obligations to the first lien
331:
387:
570:
With almost no exceptions, a borrower will take a second lien loan either at the same time or after taking a traditional first lien
316:
187:
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In the event of a bankruptcy or liquidation, the assets used by the company as security would first be provided to the first lien
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and the secured lenders will place limitations on the borrower's ability to pledge its assets or borrow additional secured debt.
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to fill small gaps between the financing needs of the borrower and maximum thresholds (measured by various
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refers to a class of obligations that are contractually subordinated in ranking to all of the
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Linklaters. Banking Update. Second lien financings and the
European loan markets.
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SECOND LIEN DEBT: A Guide to Key Terms and Inter-Creditor Issues
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replacing other more expensive forms of financing (e.g.,
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of the borrower. Second lien loans differ from both
609:
1358:
740:
510:
554:
1341:
1331:
747:
733:
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626:secured lenders. The arrangement fee and
720:The Borrowing Base with a Tranche B Loan
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728:
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13:
26:
14:
1398:
693:
581:
1340:
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610:Application in leveraged buyouts
1127:Debtor-in-possession financing
614:Second lien loans are used in
1:
700:Second Liens: Borrower Beware
1067:Staggered board of directors
7:
1184:Accretion/dilution analysis
705:Second Lien Financing Forum
641:
10:
1403:
1147:Leveraged recapitalization
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1318:Valuation using multiples
1303:Sum-of-the-parts analysis
1273:Modigliani–Miller theorem
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1132:Dividend recapitalization
1112:
960:
947:Secondary market offering
850:
839:
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529:The vast majority of all
464:History of bankruptcy law
1336:List of investment banks
1251:Free cash flow to equity
1077:Super-majority amendment
1002:Management due diligence
942:Seasoned equity offering
555:First lien secured loans
234:Voidable floating charge
1047:Shareholder rights plan
1037:Post-merger integration
1007:Managerial entrenchment
977:Contingent value rights
917:Initial public offering
481:Pre-packaged insolvency
434:Bankruptcy alternatives
322:Cross-border insolvency
260:Trading while insolvent
111:Insolvency practitioner
90:Provisional liquidation
1189:Adjusted present value
1052:Special-purpose entity
890:Direct public offering
860:At-the-market offering
224:Undervalue transaction
31:
1204:Conglomerate discount
658:Preferential creditor
429:Anti-deprivation rule
327:Insolvency Regulation
219:Fraudulent conveyance
203:Scheme of arrangement
157:Preferential creditor
136:Trustee in bankruptcy
131:Referee in Bankruptcy
30:
1226:Economic value added
1221:Discounted cash flow
811:Senior secured debt
663:Seniority (finance)
183:Administration (UK)
1346:Outline of finance
1258:Market value added
1241:Financial modeling
1199:Business valuation
1122:Debt restructuring
900:Follow-on offering
885:Corporate spin-off
843:(terms/conditions)
760:investment banking
688:Unsecured creditor
628:interest (finance)
459:Financial distress
332:UNCITRAL Model Law
250:Fraudulent trading
167:Unsecured creditor
32:
1377:Legal terminology
1367:Corporate finance
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1353:
1278:Net present value
1263:Minority interest
1194:Associate company
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1137:Financial sponsor
1057:Special situation
1027:Pre-emption right
1017:Minority discount
927:Private placement
826:Subordinated debt
781:Exchangeable debt
768:Capital structure
756:Corporate finance
683:Subordinated debt
673:Security interest
616:leveraged buyouts
599:Subordinated debt
594:Subordinated debt
549:subordinated debt
531:second lien loans
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486:Sovereign default
469:List of bankrupts
439:Creditors' rights
301:Security interest
229:Unfair preference
211:Avoidance regimes
121:Regulatory agency
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1236:Fairness opinion
1231:Enterprise value
1214:Weighted average
1142:Leveraged buyout
997:Drag-along right
895:Equity carve-out
852:Equity offerings
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816:Shareholder loan
801:Second lien debt
796:Preferred equity
776:Convertible debt
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678:Secured creditor
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296:Second lien loan
265:Wrongful trading
162:Secured creditor
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1298:Stock valuation
1293:Residual income
1209:Cost of capital
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1162:Project finance
1152:High-yield debt
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1087:Tag-along right
1012:Mandatory offer
982:Control premium
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932:Public offering
880:Bought out deal
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648:Negative pledge
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565:secured lenders
561:secured lenders
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317:Chapter 15 (US)
281:Floating charge
188:Chapter 11 (US)
65:Conservatorship
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1313:Terminal value
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1246:Free cash flow
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1157:Private equity
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786:Mezzanine debt
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694:External links
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444:Chapter 9 (US)
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491:Subordination
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413:United States
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309:International
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198:Restructuring
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175:Restructuring
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1288:Real options
1104:Tender offer
964:acquisitions
952:Underwriting
937:Rights issue
840:Transactions
800:
622:metrics) of
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572:secured loan
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398:South Africa
295:
95:Receivership
75:Examinership
1062:Squeeze-out
1032:Proxy fight
962:Mergers and
875:Bought deal
806:Senior debt
668:Senior debt
541:obligations
403:Switzerland
255:Misfeasance
85:Liquidation
70:Dissolution
1372:Bankruptcy
1361:Categories
1308:Tax shield
1268:Mismarking
1072:Stock swap
1022:Pitch book
992:Divestment
870:Bookrunner
791:Pari passu
653:Pari passu
475:Pari passu
340:By country
126:Liquidator
50:Bankruptcy
20:Insolvency
1283:Pure play
1176:Valuation
1042:Sell side
905:Greenshoe
378:Hong Kong
353:Australia
193:Cram down
144:Claimants
103:Officials
37:Processes
1114:Leverage
1092:Takeover
987:Demerger
972:Buy side
642:See also
620:leverage
348:Anguilla
291:Mortgage
273:Security
242:Offences
152:Creditor
116:Tribunal
1097:Reverse
1082:Synergy
922:Pre-IPO
910:Reverse
831:Warrant
586:Unlike
538:secured
454:Default
388:Ireland
1382:Credit
633:senior
624:senior
603:senior
535:senior
449:Debtor
393:Russia
368:Cayman
363:Canada
1387:Loans
821:Stock
421:Other
383:India
373:China
758:and
547:and
533:are
286:Lien
638:).
358:BVI
80:IVA
60:CVA
1363::
551:.
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