Private Credit Flashcards
Name 4 private credit benchmarks
Cambridge Associates Private Credit Index
Cliffwater Direct Lending Index (CDLI)
S&P/LSTA Leveraged Loan Index
Burgiss Private Debt Index
What is the LSTA
LSTA (Loan Syndications and Trading Association)
Name 4 functions of the LSTA
Functions of the LSTA
- Market Standards & Best Practices
- Loan Market Data & Indices – It provides benchmarks like the S&P/LSTA Leveraged Loan Index
- Regulatory Advocacy
- Education & Research
What is a syndicated Loan
A syndicated loan is a large loan provided by a group of lenders—called a syndicate—to a single borrower
Tell me the different types of private credit
- Direct Lending
- Mezzanine Debt
- Distressed Debt & Special Situations
- Asset-Based Lending (ABL)
- Venture Debt
- Opportunistic Credit
- Real Estate Debt
- Infrastructure & Specialty Finance
Tell me what mezzanine Debt is
A hybrid of debt and equity financing, sitting between senior debt and equity in the capital structure.
Higher yield than senior debt, often includes warrants or equity kickers.
Used for growth financing, leveraged buyouts (LBOs), or recapitalizations.
What are the 6 levels of the Capital Structure Hierarchy From Safest to Riskiest
1 -Senior Secured Debt (Lowest Risk, Lowest Return)
2 - Senior Unsecured Debt
3 - Subordinated (Junior) Debt
4 - Mezzanine Debt
5 - Preferred Equity
6 - Common Equity
What is Senior Secured Debt
What it is: Loans backed by specific collateral (e.g., real estate, equipment, receivables).
Why it’s safe: First in line for repayment in bankruptcy. If the borrower defaults, lenders can seize and sell the collateral.
Examples: First-lien loans, asset-backed loans.
What is Senior Unsecured Debt
What it is: Loans or bonds not backed by specific collateral.
Why it’s riskier: Still has priority over junior debt and equity but lacks collateral backing.
Examples: Investment-grade corporate bonds, unsecured revolving credit facilities.
What is Subordinated (Junior) Debt
What it is: Debt that is lower in priority than senior debt in the repayment hierarchy.
Why it’s riskier: Gets repaid only after all senior obligations are settled.
Examples: High-yield (junk) bonds, unsecured term loans, subordinated notes.
What is Mezzanine Debt
What it is: A hybrid of debt and equity, often including warrants or convertibility into equity.
Why it’s even riskier: No collateral, and repayment depends on senior debt getting paid first. However, it offers higher returns (often 10-15%+).
Examples: Convertible debt, preferred equity with debt-like features.
What is a Unitranche Loans
Definition: A hybrid loan that combines senior and subordinated debt into a single loan with a blended interest rate.
Risk Level: Moderate—lenders assume both senior and junior debt risk in a simplified structure.
Return Profile: Higher than traditional senior secured loans but lower than pure mezzanine debt.
Example: A private equity firm acquires a company using a $100M unitranche loan instead of structuring separate senior and subordinated debt tranches.
