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21 Cards in this Set
- Front
- Back
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Absolute priority |
A rule that stipulates the order of payment- creditors before shareholders- in the event of liquidation |
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Acceleration |
A req that debt be repaid sooner than originally sch'd and typically forces defalut |
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Assignment |
When senior lenders typically restrict the rights of the mezzanine investor to assign or sell its interests to a thrid party |
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Blanket subordination |
Prevents any payment of principal or interest to teh mezz investor unitl after teh senior debt has been fully repaid |
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Blocking position |
A single creditor can block a plan of reorganiation if it holds a thrid of the dollar amount of any class of claimants |
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Chapter 11 bankruptcy |
Chapter of the US bankruptcy code which permits reorg under the bankruptcy laws of the US |
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Chapter 7 bankruptcy |
Governs the process of a liquidation bankruptcy |
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Classification of claims |
When under a reorg plan different classes of equity and bondholders are entitled to certain claims on the companys assets |
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Cramdown |
Involuntary imposition by a court of a reorg plan the objection of some classes of creditors |
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Debtor-in-possession financing |
Specail form of financing provided for co's in financial distress or undier Ch. 11 bankruptcy process. Usually this debt is considered senior to all otehr debt equity and any other secs issued by a co. It gives a trouped co a new start, albeit under strict conditions |
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Fulcrum sec's |
The jr. secs most likely to convert to or receive eqty in a rogor co after it smerges from Ch 11of the bankrupty code. Some investors purchase this security as part of a strat to take ownership of the co. While in the past, the fulcrum sec was unsecured bet, today it is increasingly secured debt. For example, lenders may provide DIP financing as party of a loan-to-own strategy, based on an analysis that the debt represented by the DIP financing may ultimately result in a controlling ownerhip position in a company |
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Intercreditor agreement |
Agreement among creditors that sets forth the various lien positions and the rights and liabilites of each creditor and its impact on the other creditors |
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Loan-to-EBITDA multiple |
Debt divided by EBITDA. Bank loans and senior loans usually require a multiple of no more 2 to 2.5 |
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Mezzanine funds |
Funds that provide mezz financing |
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PIK toggle |
With a PIK toggle note, teh borrower in each interest period has the option to pay interest in cash or to PIK (let the interest payment accrue to the principal balance) the interest pament |
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Plan of reorg |
A business plan for emerging from bankrupty protection as a vialbe concern |
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Prepackaged bankrupty filing |
When a debtor co agress in advance (before filing Ch 11) with its creditors on a plan of organization |
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Springing subordination |
Allows the mezz investor to receive interest payment while the senior debt is still outstanding. But if a defalut occurs or a covenant is violated, the subordination springs to stop all payments to the mezz investor until the defalut is cured or teh senior debt has been fully repaid |
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Stretch financing |
Stretch loans are extended to thsoe individuals or cos that are in dire need of financing |
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Takeout provision |
Allows the mez investor to purchase the sr debt once it has been repaid to a specified level. Allows teh mez investor to become the most senior lender to teh co and take control of the firm. At this point, the investor usually converts the debt into equity and become sthe largest shareholder of the co |
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Weighted average cost of captial WACC |
Rate that teh co is exected to pay on avg to all its security holders to finance its assets |
