Chapter 15 Debt Financing

Term loan

A bank loan that lasts for a specific term

Callable bonds

Bonds containing a call provisions that allows the issuer to repurchase the bonds at a predetermined price

Private Debt

Debt that is not publicly traded.

Seniority

indicates preference in position over other lenders In the event of default, holders of subordinated debt must give preference other specified creditors who paid firt DEBT IS ALWAYS PAID BEFOR EQUITY

Call price

A price specified at the issuance of a bond for which the issuer can redeem the bond.

Syndicated bank loan

A single loan that is funded by a group of banks rather than just a single bank.

Secured Debt

A type of corporate loan or debt security in which specific assets are pledged as a firm's collateral that bond holders have a direct claim to in the event of a bankruptcy

Asset backed line of credit

A type of credit commitment, where the borrower secures a line of credit by pledging an asset as collateral

Unsecured Debt

A type of debt that gives bondholders a claim to only the assets of the firm that are not already pledged as collateral on other debt.

Revolving line of credit

A credit commitment for a specific time period, typically two to three years, which a company can use as needed.

Fixed Rate

An interest rate on a liability, such as a loan or mortgage, that remains fixed either for the entire term of the loan or for part of this term.

Indenture

Included in a prospectus, it is a formal contract between a bond issuer and a trust company, which represents the bondholders' interests

Floating Rate

Refers to any type of debt instrument, such as a loan, bond, mortgage, or credit, that does not have a fixed rate of interest over the life of the instrument.

Covenants

Restrictive clauses in a bond contract that limit the issuer from taking actions that may undercut its ability to repay the bonds

Call date

The date in the call provision on or after which the bond issuer has the right to retire the bond

Convertible bonds

corporate bonds with a provision that gives the bondholder an option to convert each bond owned into a fixed number of shares of common stock.

Private placement

A bond issue that does not trade on a public market but rather is sold to a small group of investors.