Second Lien Loan
What is it?
- It is a type of debt financing that is secured by collateral whose lien on the collateral is junior to a first lien loan.
- It considers the ranking of the debt in instances of bankruptcy and/or liquidation consequently after the first lien loan is repaid.
- Another term used for second lien loan is subordinated debt.
What to expect?
- Second lien loans typically have a maturity of three to five years as well as an amortizing principal payment schedule.
- Borrowers must be aware of the key metrics that lenders look for before taking on the loan. Some of these key metrics include, but not limited to, the following: D/E ratio D/EBITDA ratio caps (depending on markets).
- Most second lien loans have redemption and call protection provisions in the contract.
- This type of loan is also considerably cheaper than non secured debt and generally does not have warrants or equity kickers unlike a mezzanine loan.
Who should consider
- Companies who are looking for short-term financing, who have already considered the risks, with interest rates that are significantly higher than senior loans.
- Companies that need additional capital in their balance sheet and are able to take on another loan.
How Can Bayfront Help
Strategy Review
Detailed analysis of the Client and advise on value-adding corporate strategies.
Structuring
Detailed analysis of the Client’s capital structure and advise on the optimal proportion of equity and debt.
Deal Execution Management
Assisting in execution of deal processes, most commonly in the form of capital raising.
Information Memorandum
For presenting to different target audience such as lenders, new sales relationships, new client relationships.
Governance Review
To determine the specific governance needs of a company and assist in areas which would minimize risks and help achieve business goals.
