Latham and Watkins Book of Jargon®: US CORPORATE AND BANK FINANCE

Bondholder

exactly what you think it means—a holder of a Bond.

Bank-Only Deal

financing consisting only of bank debt (i.e., no Bridge Facility or Securities).

Agent

generic term used to describe any of the Administrative Agent, Collateral Agent, Documentation Agent and Syndication Agent.

Breakup Fee

in an M&A transaction, a fee the seller must pay to the original buyer if the seller ends up selling to a different buyer. Compare Reverse Breakup Fee.

Affirmative Covenant

requires a Borrower or Issuer to affirmatively do something. These are contractual provisions in an Indenture or a Credit Agreement that itemize certain actions the Issuer or Borrower must take to be in compliance with the applicable document. Think of these as the "Thou Shalt" Covenants. Affirmative Covenants are usually more boilerplate in nature, covering such things as a promise by the Borrower to pay Interest and fees, maintain insurance, pay taxes, provide quarterly operating reports, and so forth. In a secured deal, the Affirmative Covenants regarding delivery and maintenance of Collateral will be more highly negotiated. Compare Negative Covenant.

Bringdown Certificate of Good Standing

see Certificate of Good Standing.

At Par

see Par Value.

Bridge Loans

short-term loans that typically (although not always) are not intended to be funded. The purpose of a Bridge Loan is to provide a bidder with committed financing in the context of an auction for a business in case the Subordinated acquisition financing cannot be consummated prior to the consummation of the acquisition (i.e., to "bridge" the gap in financing). Traditionally, Bridge Loans are used by Financial Buyers (Sponsors) in auction situations, but corporate buyers also sometimes use Bridge Loans to finance acquisitions. In the Commitment Papers context, Bridge Loans are sometimes referred to as the Bridge Facility.

Bankruptcy Code

Title 11 of the United States Code.

Bridge Loan Agreement

a Credit Agreement governing Bridge Loans.

Bridge Facility

a Credit Facility pursuant to which Lenders make Bridge Loans.

Balance Sheet

a financial statement on which a company reports its assets, liabilities and equity as of a given point in time. In contrast to an Income Statement, which depicts a company's situation over a period of time, a Balance Sheet provides a "snapshot" as of a moment in time. The term Balance Sheet derives from the accounting principle that a company's assets must equal (or "balance" with) its liabilities plus stockholders' equity. See Income Statement.

Big Boy Letter

a letter sometimes entered into in connection with a secondary trade of Securities where one party to the trade has more information about the Issuer than the other. A Big Boy Letter says something to the effect that one party may have more information than the other about the Issuer, but because they are both "big boys," they are still knowingly and willingly entering into the transaction. Big Boy Letters raise a number of interesting legal issues, including whether the letter itself is actually enforceable and whether or not the letters actually work as a defense against insider trading liability.

AAU

acronym for Agreement among Underwriters.

10b-5 Rep

another name for a Rule 10b-5 Representation.

"A" Loan

another name for a Tranche A Term Loan.

"B" Loan

another name for a Tranche B Term Loan.

Asset Sale Sweep

another name for an Asset Sale Prepayment.

Agreement among Underwriters

the agreement that governs the relationship among the Underwriters in a registered Securities offering. See Master Agreement among Underwriters. There is no directly comparable document among the members of a bank loan Syndicate, mostly as a matter of custom. See, however, Syndication Agreement.

Book Value

the dollar amount stated for particular assets on a company's Balance Sheet.

Bank Meeting

the initial meeting of potential Lenders to whom an Arranger hopes to Syndicate a Credit Facility, at which meeting the Bank Book will be discussed.

Amortizing Loan

usually a reference to a Tranche A Term Loan.

Acquisition Line

a Delayed Draw Term Facility intended to be used to fund acquisitions.

404 Compliant

an Issuer that is compliant with SOX Section 404.

Bridge Facility Term Sheet

an annex to the Commitment Letter that contains a summary of the terms of the Bridge Facility. In a committed financing, each series of Notes contemplated to be part of the permanent financing structure is backed up by a bridge, so in instances where there is more than one series of Notes (for instance, senior and senior Subordinated), there will be multiple bridges. These multiple bridges may be described in one or multiple Term Sheets.

144A Offering

another name for a Rule 144A Financing.

Base Rate Loans

loans bearing Interest based upon the Base Rate.

Article 9

the law that governs the validity and Perfection of Security Interests in most personal property. This is the article of the UCC that governs secured transactions. See Perfection.

Automatic Stay

the rule under Bankruptcy law that once a Bankruptcy case is commenced, creditors and other parties generally are not permitted to collect on claims against the debtor or otherwise obtain or exercise Control or possession over property of the debtor's bankruptcy estate outside of the Bankruptcy proceedings. Creditors may seek relief from the Automatic Stay by filing a motion with the Bankruptcy court. There are also a number of exceptions to the Automatic Stay, such as governmental entities exercising their police power and the termination or liquidation of certain financial contracts.

Administrative Agent

the bank that serves as the principal Agent administering the Credit Facilities documented in the Credit Agreement. The Administrative Agent is responsible for processing Interest payments to Lenders, posting notices delivered by the Borrower, and acting as the primary representative of the Lenders under a Credit Agreement in dealings with the Borrower. The Trustee performs an analogous role in Bond land.

Base Prospectus

a Shelf Registration Statement contains two parts: (i) the Base Prospectus (which is in the initial filing) and (ii) the Prospectus Supplement (which is filed along with the Base Prospectus when the Issuer executes a "takedown" off the shelf). See Shelf Takedown.

Base Rate

a Floating Rate of Interest that varies daily, usually equal to the higher of (i) the prime rate and (ii) the Federal Funds effective rate plus ½ percent. Lending rates are set at a margin over the Base Rate, depending on the risk involved. See Applicable Margin and LIBOR.

Bank-Bridge Structure

a set of Commitment Papers that contains terms for both a Senior Secured Credit Facility and a Bridge Facility.

AHYDO Rules

AHYDO (Applicable High Yield Discount Obligations) Rules under the Internal Revenue Code limit a company's ability to deduct Interest on certain High Yield instruments issued with OID. These rules are particularly important in hot markets when Bonds with a PIK feature are being sold. Normally, a company can deduct Interest from its calculation of taxable income, whether paid in cash or in kind. However, if the AHYDO Rules apply, a company cannot deduct Interest from its calculation of taxable income until it pays the Interest in cash (and the company may be prohibited from deducting a portion of the Interest permanently). If a debt instrument is issued by a partnership (or a limited liability company or other entity that is taxed as a partnership), the AHYDO Rules would apply to any corporate partner of the Issuer. The AHYDO Rules apply if a debt instrument meets each of the following criteria (i) it is issued by a corporation; (ii) it has a maturity greater than five years; (iii) it is issued with "significant OID;" and (iv) it is issued at a Yield to maturity that equals or exceeds the applicable federal rate for the month of issuance (the "AFR") plus 500 Basis Points. "Significant OID" generally means that the debt instrument permits the Borrower to pay more than one year's worth of Interest in the aggregate over the first five years of the life of the instrument on a non cash basis. If the AHYDO Rules do apply, then the Issuer (or, in the case of a partnership Issuer, its corporate partners) cannot take tax deductions for non-cash Interest payments until the Interest is actually paid in cash. In addition, if the Yield to maturity on the debt instrument exceeds the AFR plus 600 Basis Points, and if the AHYDO Rules otherwise apply, then the Issuer (or its corporate partners) can never take the deduction for any Interest over that level. For a more comprehensive summary of the AHYDO Rules, see Latham & Watkins Client Alert No. 598, The AHYDO Rules and the PIK Toggle Feature (May 16, 2007), available at www.lw.com. See AHYDO Catch-Up Payment.

Adjusted EBITDA

EBITDA on steroids. Refers to EBITDA, adjusted to eliminate the impact of certain unusual or non-cash items that the Issuer or Borrower (or its Sponsor) believes are not indicative of the future performance of its business. For Reporting Issuers, disclosure of EBITDA, Adjusted EBITDA and other "non-GAAP financial measures" must be done within the confines of Item 10 of Regulation S-K (in the case of certain public filings) and Regulation G of the SEC (in all cases). A form of Adjusted EBITDA is also a component of the Leverage Ratio and Fixed Charge Coverage Ratio definitions.

Beneficial Owner

Section 13(d) of the Exchange Act and the Rules adopted thereunder (most notably Rule 13d-3) cover the gory details of this concept. The big picture is this: if you have the power to vote or dispose of a particular Security, either individually or as part of a group acting in concert, then you are probably the Beneficial Owner of that Security.

Anti-Layering Covenant

a Covenant that prohibits an Issuer from Layering in another series of debt between the Senior Debt and the Subordinated Debt. This is essentially a no-cheating rule and is only used in Senior Subordinated deals. Senior Notes include an analogous provision that requires that all debt that Subordinates itself to any Senior Secured Credit Facilities also Subordinate itself to the Senior Notes. The Anti-Layering Covenant ensures that the Subordinated Debt occupies the second class slot and not the third or fourth. Since Second Lien Facilities are effectively "sandwiched" in-between the First Lien Facilities and unsecured Bonds, Second Lien Facilities are sometimes prohibited by the Anti-Layering Covenant.

Assignment

a Lender's transfer of its rights and obligations under a Credit Agreement or Bridge Loan Agreement to a new Lender. Borrowers frequently like to maintain a degree of control over the Assignment process through consent rights and, in some cases, Blacklists. Lenders prefer to limit such consent rights in order to maximize Syndication options and keep the loans more freely tradable. Note that a Borrower's right to consent to transfers is an important fact that helps distinguish loans from Securities.

Affiliate Transactions Covenant

a Negative Covenant that protects against disguised dividends by preventing the Issuer from entering into non-arm's-length transactions with its Affiliates, such as paying excessive management fees to deal Sponsors, selling assets to stockholders for less than fair market value or overpaying stockholders/ employers through excessive salaries. The Affiliate Transactions Covenant typically does not flatly prohibit Affiliate transactions, but rather requires that they be on arm's-length terms and, at certain dollar thresholds, be approved by disinterested directors. Fairness opinions are also sometimes required.

Automatic Shelf Registration

a Registration Statement on Form S-3 or F-3 filed by a WKSI. The advantage of an Automatic Shelf Registration (as opposed to a plain-vanilla Shelf Registration filed by a company that is not a WKSI) is that it becomes automatically effective, so that sales of the Securities can take place immediately after filing, without the possibility of SEC review.

Asset-Based Loan

a Revolving Facility where the total amount that can be borrowed fluctuates based upon the value of certain assets of the Borrower at a given time. Unlike a Cash Flow Revolver, which provides the Borrower with a line of credit in a fixed amount that can be borrowed at any time, an Asset-Based Loan limits that line of credit to the lesser of a fixed amount and a percentage of the value of a certain set of assets (typically accounts receivable and inventory). This is often referred to as a Borrowing Base. Asset-based lending is a way for companies to meet their short-term cash needs by borrowing against their short-term assets at favorable rates. Asset-Based Loans are particularly popular among retailers and other businesses with large amounts of accounts receivable and inventory. See Borrowing Base.

144A for Life Offering

a Rule 144A Financing that does not provide Registration Rights for the buyers of the Securities. Accordingly, the Issuer in a 144A for Life Offering is not required to become a Reporting Company under the Exchange Act.

Best Efforts Syndication

a Syndication where the Arranger commits to provide less than the entire amount of the loans (or even none of them), but agrees to use its "commercially reasonable" efforts (not "best" efforts, notwithstanding the name) to find Lenders to provide the loan. Traditionally used for risky Borrowers, complex transactions or Syndications in bad markets.

Accelerated Filer

a category of Issuer created by SEC rules. An Issuer's status as an Accelerated Filer, as opposed to a Large Accelerated Filer, a Non-Accelerated Filer or a Smaller Reporting Company, determines when its Financial Statements go Stale and when it has to comply with SOX Section 404. An Issuer qualifies as an Accelerated Filer if (i) its Public Float is between $75.0 and $700.0 million as of the last business day of the second fiscal quarter of the Issuer's preceding fiscal year and (ii) it has been subject to the requirements of Section 13(a) or 15(d) of the Exchange Act for at least 12 months, including the requirement to file an annual report. Once an Issuer is in Accelerated Filer land, its Public Float has to fall below $50.0 million to get out. See Latham & Watkins Desktop Staleness Calendar, available at www.lw.com.

Amendment

a change to the provisions of an existing agreement. For instance, a Borrower might amend its Credit Agreement to allow for more indebtedness to be incurred. See also Technical Amendment.

Borrower

a company that borrows under a Credit Agreement.

Alternative Transactions Language

a provision in the Fee Letter that says that the investment bank that has committed to a Senior Secured Credit Facility or Bridge Facility will still get paid all or some of its agreed fees if the Borrower ends up funding the applicable facilities through a different bank. Sometimes this is negotiated down to either giving the original bank a right to play in any new deal (but not a guarantee of payment), or giving the original bank an amount of fees equal to what the alternative bank gets.

Bankruptcy Remote Vehicle

a company that is set up within a corporate group in a way so as to prevent the insolvency of that company from affecting any other company within the group. A Bankruptcy Remote Vehicle is often created for a limited corporate purpose. A typical example would be when a Bankruptcy Remote Vehicle is set up for the purpose of acquiring or operating a particularly risky asset or making investments. Conducting a transaction by means of forming and utilizing a Bankruptcy Remote Vehicle is a type of Off Balance Sheet Arrangement. Also known as a Special Purpose Vehicle (SPV) or Special Purpose Entity (SPE).

Borrowing Base

a concept in an Asset-Based Loan where the maximum amount available for borrowing under a Revolver is a moving target. A Cash Flow Revolver does not have a Borrowing Base. A Cash Flow Revolver provides the Borrower with a line of credit up to a fixed dollar amount. When there is a Borrowing Base, the maximum amount available for borrowing moves based on the dollar value of the pledged Collateral (e.g., receivables, inventory, equipment) multiplied by a discount factor, and subject to an overall Cap. For example, Lenders might agree to advance funds against 80 percent of accounts receivable and 60 percent of inventory up to a maximum amount of $100.0 million. So the amount available on any date is the lesser of the amount of the Borrowing Base and the maximum revolving commitment amount (minus amounts already borrowed and outstanding). See Asset-Based Loan and Availability.

Bill of Lading

a document issued by a carrier of goods to a shipper, acknowledging that specified goods have been received on board from the shipper as cargo for conveyance to a named place for delivery. If a Bill of Lading is issued "to order" of the recipient of the goods (the "consignee") or another party (usually the shipper), then it is a Negotiable Instrument.

Bankruptcy

a federal court process under the Bankruptcy Code whereby a company restructures its debt under the auspices of the Bankruptcy court. There are advantages (such as the ability to Cramdown a plan on dissenting creditors) and disadvantages (such as high costs and public disclosure requirements) to restructuring debts in Bankruptcy, as opposed to out of court.

Blacklist

a list put together by the Borrower or the Sponsor of Lenders to whom a certain loan may not be Assigned because the Borrower or Sponsor believes the Lenders on the Blacklist will not be easy to deal with (in terms of Amendments, consents, etc.) over the life of its loans.

Blackout Period

a provision in a Commitment Letter that certain holiday time periods (generally late August, late December and around Thanksgiving) do not count as part of the Minimum Marketing Period and Minimum Syndication Period. In the Securities context, Blackout Period also refers to a period during which certain designated individuals are prohibited from trading in a company's equity Securities. Blackout Periods in the Securities context are governed by SEC Regulation BTR (Blackout Trading Restriction), which came about as a result of Sarbanes-Oxley. Regulation BTR prohibits directors and executive officers of public companies from trading that company's equity Securities during a Blackout Period under the company's pension or 401(k) plans. The regulation came about after several highly publicized cases in which senior executives of soon-to-fail companies sold shares at the same time their employees' plans prohibited the employees from doing so.

Booster Shot Provision

a provision in a Lockup Agreement providing for automatic extension of the Lockup (generally by 18 days) in instances where (i) the Issuer has announced material news during the last 17 days of the Lockup period or (ii) prior to the expiration of the Lockup period, the Issuer announces that it will release earnings during the 15-day period following the expiration of the Lockup. The provision is placed in Lockup Agreements because FINRA rules prohibit analysts from issuing positive research (booster shot) reports or reiterating "buy" recommendations around the expiration of a Lockup Agreement. The industry solution to these rules has been to extend the Lockup period so that it would not expire within the 15-day period following an earnings release, thus allowing analysts to publish during the several days following an earnings release.

Bringdown Comfort Letter

a second Comfort Letter, delivered at Closing, that Ticks and Ties to the Final and updates the change period comfort to a date not more than three to five business days prior to the Closing Date.

Asset Sale Prepayment

a specific type of Mandatory Prepayment. This provision in a Credit Agreement requires the loans to be prepaid with the net cash proceeds of certain (or, in some cases, all) non-ordinary course asset sales of the Borrower and its subsidiaries. The idea is that secured loans are made partly based on the knowledge that a certain amount of asset value is held by the Borrower and pledged as Collateral. To the extent the Collateral is disposed of, the loans are prepaid with the proceeds. This provision will often pick up proceeds of casualty or condemnation insurance, thereby incorporating the Insurance Proceeds Prepayment provision. This repayment requirement is often subject to a Reinvestment Right (if the Borrower reinvests the proceeds within a certain period, it generally does not have to repay the loans with these proceeds).

As-Extracted Collateral

a type of personal property defined in Article 9. It consists of (i) oil, gas or minerals that are subject to a Security Interest before they have been extracted or (ii) accounts from the sale of oil, gas or minerals that the debtor has an interest in before their extraction. For troubled credits, may also include teeth.

Bill of Exchange

a written, unconditional order by one party (the "drawer") to another (the "drawee") to pay a certain sum to a third party (the "payee"), either immediately or on a fixed date, for payment of goods or services received. A Bill of Exchange is not a Negotiable Instrument unless it states that payment is to be made "to order" of the payee.

ABL

acronym for Asset-Based Loan.

Basket

an exception contained in a Negative Covenant (usually expressed as a dollar amount). For example, a Negative Covenant may be: "Borrower shall not issue additional debt;" a Basket would be: "except for unsecured debt in an amount not to exceed $10.0 million." See also Carveout.

Available Amounts Basket

an extra Basket (included in some Credit Agreements) that may be used for dividends, Capital Expenditures, investments or the prepayment of other (usually Subordinated) debt. This is a bank land replica of the way Restricted Payment capacity works in most High Yield Indentures. The Available Amounts Basket generally starts with 50 percent of consolidated net income or that portion of Excess Cash Flow that is not captured by the Excess Cash Flow Sweep, and builds cumulatively over time (perhaps with the receipt of equity proceeds, in deals where no Equity Sweep is present). Though available for Capex, prepayments of other debt, dividends and investments, the Available Amounts Basket is a single Basket, so usage for one purpose reduces the amount available for other purposes.

Broker-Dealers

entities that have to register with the SEC because they trade Securities for themselves or on behalf of others.

Beige Book

an informal name for a report published by the Federal Reserve Board eight times a year. The report is a collection of current economic conditions and is gathered by the Federal Reserve Bank in each of the 12 districts and is based on sources such as bank and branch director reports and expert interviews. An overall summary is prepared by a designated Federal Reserve Bank on a rotating basis.

Angel Investor

an investor that provides capital for a business startup, usually in exchange for convertible Preferred Stock or equity ownership.

Bear Hug Letter

an offer letter by an acquiror to buy a Target at a price considerably in excess of the Target's current share price. Called a Bear Hug because the high price is hard to resist.

Bought Deal

an offering of Securities in which one or a few Underwriters buy the entire issue at a fixed price before a formal marketing process has commenced.

Agency Fee

another name for Administrative Agent Fee.

ABR Loans

another name for Base Rate Loans.

Accounting Circle Up

another name for a Circle Up.

A/B Exchange Offer

another name for an Exchange Offer.

'34 Act

another name for the Exchange Act.

'33 Act

another name for the Securities Act.

Accredited Investor

defined under SEC Rule 501 of Regulation D, this refers to people and entities that are permitted to buy Securities in a Private Placement. The term covers virtually all the types of institutions that are participants in the Private Placement market, and also includes people who are either rich or sophisticated. It is, of course, better to be both rich and sophisticated, but one will do for Regulation D purposes.

Bonds

debt instruments that represent a fixed principal amount of money and a fixed (or floating) Interest Rate. Also known as Notes or Debentures. These puppies are almost always issued pursuant to an agreement known as an Indenture. See also Fixed Income Security.

Affiliate

defined slightly differently in different types of agreements, but generally refers to a subsidiary, corporation, partnership, or other person controlling, controlled by or under common control with another entity. The official Securities law definition is found in SEC Rule 144.

AHYDO Catch-Up Payment

it is possible to avoid "significant OID" (and thereby avoid the AHYDO Rules altogether) by providing for a "catch-up" payment to holders of certain High Yield instruments issued with OID on or before the first payment date after the fifth anniversary of the original issuance of the debt instrument. The purpose of the AHYDO Catch-Up Payment is to pay enough of the OID in cash so that the Issuer is not more than one year's worth of Interest behind on that date. For a more comprehensive summary of the requirements for an AHYDO Catch-Up Payment that will permit a debt instrument to avoid the AHYDO Rules, see Latham & Watkins Client Alert No. 598, The AHYDO Rules and the PIK Toggle Feature (May 16, 2007), available at www.lw.com.

All or Substantially All

no one knows exactly what this phrase means. This phrase is used in various Covenants and other contractual provisions, but the precise meaning is the subject of much debate (and litigation). It does not necessarily mean what it sounds like in general layman's terms. See, for example, Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039 (2d Cir. 1982) and B.S.F. Co. v. Philadelphia National Bank, 204 A.2d 746 (Del. 1964).

Basis Point

one one-hundredth of a percentage point (e.g., 50 Basis Points equals 0.50 percent).

Admin Agent

shorthand for Administrative Agent.

bps

shorthand for Basis Points and generally pronounced "bips."

Bringdowns

shorthand for Bringdown Certificates of Good Standing.

Bank Book

shorthand for the Confidential Information Memorandum (or CIM) used to Syndicate the bank loans.

Accordion Feature

so called because it resembles the expanding musical instrument whose name it shares, this is a feature in a Credit Agreement that allows the Borrower to increase the maximum commitment amount under a Revolver or to incur additional Term Loan debt under circumstances specified in the Credit Agreement. The Accordion, however, is not pre-committed financing. It is really just an advance agreement to share Collateral with additional Lenders in the future if the Borrower can find them on the agreed terms. Also known as an Incremental Facility.

Bookrunner

the Arranger who determines what portion of a Credit Facility will be allocated to each potential Lender. See Arranger. The Bookrunner should not be confused with the Syndication Agent for a particular Credit Facility. The Syndication Agent role (like the Documentation Agent role) is often driven entirely by a desire to hand out League Table Credit—these other Agents don't actually do much of anything. The Bookrunner actually runs the books during Syndication. Similarly, the Bookrunner in a Securities offering manages the Syndication efforts. See Lead Managing Underwriter.

Asset Sale Covenant

the Covenant in an Indenture or Credit Agreement that governs the sale of assets. In an Indenture, the Covenant assures that the Issuer's Balance Sheet stays in balance by making sure that if assets shrink, the Issuer either replaces the assets with new assets or reduces its debt. The company is allowed to sell assets under the Covenant, but it must get fair market value and mostly cash (typically 75-85 percent). The proceeds must be used to repay Senior Debt, reinvested in long-term assets useful in the business or used to make an offer to repurchase Bonds at Par. In a Credit Agreement, by contrast, this Covenant strictly limits the Borrower's ability to sell assets, except as may be specifically negotiated on a deal-by-deal basis. In the Credit Agreement context, see also Asset Sale Prepayment.

Applicable Margin

the additional percentage that is added to a particular Interest Rate index to determine the Interest Rate payable on variable rate debt. Generally, the Credit Agreement (or the Interest Rate section of the Senior Secured Facilities Term Sheet) will set the Interest Rate at either (at the Borrower's option) the Base Rate plus a specified percentage, or LIBOR plus a specified percentage. The specified percentage is usually referred to as the Applicable Margin. The Applicable Margin for Base Rate Loans is almost always 100 Basis Points lower than the Applicable Margin for Eurodollar Loans.

Administrative Agent Fee

the annual fee paid to the Administrative Agent for administering a Credit Facility; sometimes referred to as the Agency Fee.

Acceleration

the end of the line under an Indenture or Credit Agreement. The definitions of Default and Event of Default describe how we get there. Following an Event of Default, the Bondholders (under an Indenture) or Lenders (under a Credit Agreement) have the right to "accelerate" the due date of their debts; in other words, they have the right to declare their Notes or loans immediately due and payable. Bankruptcy and insolvency Events of Default automatically lead to Acceleration.

Arranger

the investment bank that "arranges" a Credit Facility by negotiating original terms with the Borrower and Syndicating the facility to a larger group of Lenders. In a Commitment Letter, the name of the Arranger for the Senior Secured Credit Facilities is set forth in the Senior Secured Facilities Term Sheet; the name of the Arranger for the Bridge Loan Facilities is set forth in the Bridge Facilities Term Sheet. Generally, the same entity serves as Arranger for both. The Arranger generally has no ongoing obligations under a Credit Agreement or Bridge Loan Agreement after the Closing Date.

Breakage Costs

the losses, costs and expenses incurred by a Lender as a result of a Borrower's (i) failure to borrow, convert or continue a LIBOR Loan after giving notice requesting the same; (ii) failure to make a prepayment of LIBOR Loans after giving notice thereof; or (iii) making of a prepayment of LIBOR Loans on a day that is not the last day of the applicable Interest Period (i.e., the costs of "breaking" a LIBOR Tranche).

Balloon Payment

the payment of principal on a Bond or Term Loan on the Maturity Date. See Bullet Maturity.

Amortization

the required periodic repayment in installments of portions of the principal of a Term Loan prior to its final maturity. Bonds, Revolving Facilities, and Second Lien Facilities generally do not Amortize. In accounting speak, Amortization is the same concept as Depreciation, except that intangible assets are Amortized and tangible assets are Depreciated. See Depreciation.

Amortization Schedule

the schedule of regularly timed repayments of principal prior to the maturity of a Term Loan. The Amortization Schedule is usually set forth in the Senior Secured Facilities Term Sheet and in the Credit Agreement itself.

Bullet Maturity

when the entire principal of a Bond or Term Loan is due and payable on the Maturity Date (i.e., there is no Amortization prior to maturity).

Availability

this is a term used most frequently in the world of Revolving Facilities. It is a measure of the amount of additional borrowings or other extensions of credit (such as the issuance of Letters of Credit) that would be permitted under the Revolver at any particular point in time. Term Loan Facilities are generally drawn once on the Closing Date, although some allow for delayed draws during a specified period (see Delayed Draw Term Facility). Revolving Facilities are lines of credit that generally may be drawn, repaid and redrawn throughout the life of the facility, but only if there is Availability (in the case of an Asset- Based Loan, under the Borrowing Base formula). The Availability terms are found in the Senior Secured Facilities Term Sheet and then documented in full in the Credit Agreement.

Account Control Agreement

this is how Lenders in a secured financing Perfect their Security Interest in a Borrower's deposit and securities accounts. It is an agreement among the Borrower, the Collateral Agent and the bank or securities intermediary where the Borrower has its deposit or securities account. Absent an Event of Default, the Borrower usually retains full access to the account. Upon an Event of Default, however, the Collateral Agent may notify the deposit bank or securities intermediary to transfer control over the account to the Collateral Agent. A Security Interest in a securities account is typically Perfected either by means of an Account Control Agreement or by filing a Financing Statement, although a Security Interest Perfected by means of Control has Priority over a Security Interest Perfected by filing a Financing Statement. A Security Interest in a deposit account, by contrast, can be Perfected only by means of an Account Control Agreement or another method of Control, not by filing a Financing Statement.

Accreted Value

this is the original purchase price of a Zero Coupon Bond or Discount Note plus all non-cash Interest that has accrued on the Bond or Note since the date of issuance. The calculation of Accreted Value is set forth in the Indenture under which the Bonds or Notes were issued.

Arbitrage

to take advantage of a price differential between two or more markets, such as by buying an investment in one market and then immediately selling it at a higher price in another market.

Absolute Priority Rule

under Bankruptcy law, this rule states that when a company is liquidated or reorganized, senior classes of claims and equity interests must receive full distributions on account of their claims or equity interests before junior classes may receive any distributions, unless the senior classes consent otherwise.

Account

when used in secured bank land, this is not a bank account. Under the UCC, an Account is a right to payment for, among other things: (i) property that has been or will be sold, leased, licensed or assigned; (ii) services that have been done or will be done; (iii) insurance policies that have been issued or will be issued; or (iv) secondary obligations that have been incurred or will be incurred. An Account does not include a right to payment that is evidenced by Chattel Paper or an instrument, or which results from commercial tort claims, deposit accounts, investment property, Letter of Credit rights or Letters of Credit.