Search results
Results from the WOW.Com Content Network
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 the same in the event the pledged assets are not sufficient to satisfy the outstanding borrowings.
Such debt is referred to as 'subordinate', because the debt providers (the lenders) have subordinate status in relationship to the normal debt. Subordinated debt has a lower priority than other bonds of the issuer in case of liquidation during bankruptcy, and ranks below: the liquidator, government tax authorities and senior debt holders in the ...
Subordination is the process by which a creditor is placed in a lower priority for the collection of its debt from its debtor's assets than the priority the creditor previously had, [1] In common parlance, the debt is said to be subordinated but in reality, it is the right of the creditor to collect the debt that has been reduced in priority.
Tranches with a first lien on the assets of the asset pool are referred to as senior tranches and are generally safer investments. Typical investors of these types of securities tend to be conduits, insurance companies, pension funds and other risk averse investors. Tranches with either a second lien or no lien are often referred to as "junior ...
An assumable mortgage is one where the outstanding mortgage and debt is transferred to a new owner. ... Wraparound mortgages are in a junior or second lien position on the property. So if the ...
Where there are different classes, there is no need to vote in interests of the creditor as a whole. Therefore, in last year's exam, the subordinated nature of the second lender meant that there was a different class and the first group could call the debt without consequence of the second group being hesitant.
A PIK, or payment in kind, is a type of high-risk loan or bond that allows borrowers to pay interest with additional debt, rather than cash. That makes it an expensive, high-risk financing instrument since the size of the debt may increase quickly, leaving lenders with big losses if the borrower is unable to pay back the loan.
Mezzanine capital is often a more expensive financing source for a company than secured debt or senior debt. The higher cost of capital associated with mezzanine financings is the result of it being an unsecured, subordinated (or junior) obligation in a company's capital structure (i.e., in the event of default , the mezzanine financing is only ...