Why do senior notes have higher penalty for prepayment?

And for that matter, when you're doing a paper LBO (simple - term loan and senior notes are the only two items on the debt schedule) why do you leave prepayment as $0 for senior notes?

Thank you so much as always.

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3 Comments

Hedge_My_Risk

PE

8y

Bonds do not amortize.

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Authored by: Certified Private Equity Professional - Vice PresidentCertified Private Equity Pro

Daltohn

IB

8y

It's not in the interest of note holders that the company returns principal early - they would miss out on subsequent interest payments and if the bond was purchased above par the yield would be lower than estimated.

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MidtownParkAve

HF

8y

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Authored by: Certified Hedge Fund Professional - PrincipalCertified Hedge Fund Pro

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