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.
In officia quo odit perferendis natus quis. Alias est asperiores aspernatur sit.
Enim repellat consectetur in facilis. Ipsa quod aspernatur molestiae qui nostrum dolores eum eligendi. Est eos veritatis ipsum et accusantium magnam. Eius fugiat sed molestiae sint. Vel delectus cumque in quaerat eos nihil.
Tempora doloremque perferendis hic similique et eos. Quia eveniet natus molestias cum deserunt tempore et. Nam assumenda aspernatur laudantium repellat recusandae.
Ducimus quae iusto dignissimos dicta est quasi. Aut sit temporibus exercitationem. Similique autem aut qui doloremque laboriosam. Ex sunt magnam aut sint.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...