Seniority of Different Lien Bonds Versus Different Lien Bank Loans
I am just learning about debt investing and I ran across a company the other day which has both 1L and 2L bank loans, but also has 1L Senior Secured Bonds. Am I correct in assuming that even thought the 2L bank debt is 2nd lien - because it is bank debt - it is still senior to the 1L Senior Secured Bonds because Bank loans are higher in payment rank than bonds in general?
I know there are exceptions when different debt facilities are covered and secured by different specific groups of assets (which is dictated by covenants), but I am just looking to figure out if I am thinking about this correctly in general.
My guess is they have different collaterals. If something is First Lien, it should be First Lien no matter what for that specific collateral. Maybe there's a situation where 1 piece of debt is secured by assets, whereas the other is secured by cash flows. Not sure. But, 1L indicates to me that it is indeed 1L, regardless of bank debt.
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