Finance

Leveraged Finance Academy: Introduction to Leveraged Finance - 7 March 2023

Shearman & Sterling LLP

Issue link: https://digital.shearman.com/i/1494417

Contents of this Issue

Navigation

Page 13 of 62

Typical subordination scenario • First and second lien creditors have guarantees from HoldCo, Company and Guarantor OpCos – absent contractual controls both first and second lien creditors have ability to sell shares in the Company or OpCos • Structural subordination: The PIK notes are structurally subordinated to first lien and second lien debt and Local OpCo Facility • Lien subordination: First and second lien creditors have priority over unsecured creditors by virtue of their security • Contractual subordination: First lien creditors have priority over second lien creditors by virtue of the intercreditor agreement – the second lien creditors are contractually subordinated to the first lien creditors • Temporal Subordination: The PIK Notes are temporally subordinated to the first and second lien debt as this debt matures after the first and second lien debt 14 Restricted Group RESTRICTED SUB EQUITY PARENT HOLDCO COMPANY SUBSIDIARY GUARANTOR SUBSIDIARY GUARANTOR UNRESTRICTED SUB UNRESTRICTED SUB FIRST LIEN DEBT SECOND LIEN DEBT LOCAL OPCO FACILITY PIK NOTES The Debt Stack – Structuring and Incurrence Covenants

Articles in this issue

view archives of Finance - Leveraged Finance Academy: Introduction to Leveraged Finance - 7 March 2023