Products and Financings

Question 1

“A” Loan

Answer 1

Another name for a Facility A Loan.

Question 2

ABL

Answer 2

Asset-Based Loan.

Question 3

Accordian Feature

Answer 3

An Incremental Facility that allows the Borrower to increase the maximum commitment amount under a Revolver or to incur additional Term Loan debt under the Facility Agreement. Contrast with Side-Car.

Question 4

Acquisition Facility

Answer 4

A Delayed Draw Term Facility intended to be used to fund acquisitions. Often combined with a Capex Facility.

Question 5

Amortising Loan

Answer 5

A Term Loan that amortises, usually a reference to a Facility A Loan.

Question 6

Ancillary Facility

Answer 6

A Facility made available on a bi-lateral basis by a Lender using mechanics established under a Revolving Facility and which reduces that Lender’s commitments under the Revolving Facility accordingly. Established for operational ease when a Revolving Facility has been Syndicated since Ancillary Facilities are typically of a type such that they are best made available bi-laterally — examples of such facilities include overdrafts, short-term loan Facilities and foreign exchange facilities. Much more common in Europe than Swing Line Loans, which are more frequently seen in the US.

Question 7

Asset-Based Loan

Answer 7

A Revolving Facility where the total amount that can be borrowed fluctuates based upon the value of the Borrowing Base at a given time. Asset-based lending is a way for companies to meet their short-term cash needs by borrowing against their short-term assets at favourable rates. Asset-Based Loans are particularly popular among retailers, oil and gas Issuers and other businesses with large amounts of accounts receivable and inventory but can be tricky (and therefore expensive) to structure in Europe given the difficulties in some jurisdictions in taking Security over the categories of assets used for the Borrowing Base. The Asset-Based Loan market in the US is therefore significantly more developed than it is in Europe. See Borrowing Base and Borrowing Base Loan.

Question 8

“B” Loan

Answer 8

Another name for a Facility B Loan.

Question 9

Back to Back Financing

Answer 9

A Facility that is made available to a Borrower through another Lender and (often) where the terms of the two loans match, i.e., Lender A lends to Lender B that, in turn, lends to the Borrower.

Question 10

Bank Guarantee

Answer 10

An undertaking from a bank to cover a debt, risk or liability on a transaction. In other words, if the debtor fails to settle a debt, the bank will cover it. Like a Letter of Credit.

Question 11

Bank-Only Deal

Answer 11

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

Question 12

Best Efforts Deal

Answer 12

In Capital Markets, the Initial Purchasers, Managers or Underwriters may be engaged to use their “best efforts” to sell the Securities, but Best Efforts Deals do not require that the Initial Purchasers, Managers or Underwriters guarantee that it will be able to sell the Securities on any particular terms or at a certain price and relieves them from any responsibility to purchase any unsold Securities. In loan world, usually a reference to a deal which involves a Best Efforts Syndication.

Question 13

Best Efforts Syndication

Answer 13

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 “best” efforts (subject to agreed conditions) to find Lenders to provide the loan. Traditionally used for risky Borrowers, and in complex transactions, Syndications in bad markets or in other circumstances (such as Refinancings) where the Borrower doesn’t absolutely need the money by a certain time and would prefer not to pay the higher fees associated with committed financings.

Question 14

Bilateral Facility

Answer 14

A Facility with just one Lender that is not intended to be Syndicated.

Question 15

Bill of Exchange

Answer 15

A written, unconditional order by one party (the “drawer”) to another (the “drawee”) to pay a certain sum, either immediately or on a fixed date, to the order of a specific person, or the bearer. A Bill of Exchange is a Negotiable Instrument.

Question 16

Bill of Lading

Answer 16

A document acknowledging that specified goods have been received as cargo for conveyance to a named place for delivery. The Bill of Lading serves as a receipt from the carrier that items have been received for shipping. If a Bill of Lading is issued “to order” of the recipient of the goods, then it is a Negotiable Instrument.

Question 17

Bonds

Answer 17

Debt instruments that represent a fixed principal amount of money and typically a fixed (or floating) Interest Rate. Also known as Notes, Securities or Debentures. In offerings governed by the laws of a state in the US, these puppies are almost always issued pursuant to an agreement known as an Indenture, but are usually issued pursuant to a Trust Deed or Fiscal Agency Agreement (in each case containing the Terms and Conditions of the Bonds) with respect to English law governed offerings. See also Fixed Income Security.

Question 18

Borrowing Base

Answer 18

A concept in an Asset-Based Loan where the maximum amount available for borrowing under a Revolver constantly changes. When there is a Borrowing Base, the maximum amount available for borrowing moves based on the Base Currency value of certain eligible categories of Collateral (e.g., receivables, inventory, equipment) multiplied by a discount factor less a reserve reflecting priority claims, and subject to an overall Cap. For example, Lenders might agree to advance funds against 80% of eligible accounts receivable and 60% of eligible inventory up to a maximum amount of €100 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.

Question 19

Borrowing Base Loan

Answer 19

Another name for an Asset-Based Loan.

Question 20

Bought Deal

Answer 20

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. See Backstop.

Question 21

Bridge Facility

Answer 21

A Facility pursuant to which Lenders make Bridge Loans. In a committed financing, each series of Notes contemplated to be part of the permanent financing structure is backed up by a Bridge Facility, so in instances where there is more than one series of Notes (for instance, senior and senior secured), there will be multiple Bridge Facilities.

Question 22

Bridge Loans

Answer 22

Short-term loans that are not typically (although not always) 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 Notes offering contemplated as part of the 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. Bridge Loans typically have an initial maturity of one year, which automatically converts into a longer maturity Term Loan which can, in certain circumstances, be “flipped” into Exchange Notes.

Question 23

“C” Loan

Answer 23

Another name for a Facility C Loan.

Question 24

Call Option

Answer 24

A financial contract between a buyer and a seller, where the buyer has the right (but not the obligation) to buy a specific quantity of a Commodity or a Security or other financial instrument from the seller at a specified time and at a specified price. Also describes the option of an Issuer to redeem its outstanding Bonds on a date earlier than the Maturity Date following the Non-Call Period as described in the Terms and Conditions or the Indenture. Compare Put Option. See also Option.

Question 25

Capex Facility

Answer 25

A Delayed Draw Term Facility intended to be used to fund Capex. Often combined with an Acquisition Facility.

Question 26

Capitalised Lease

Answer 26

A lease where the lessee assumes some of the risks of ownership and enjoys some of the benefits. In accounting terms, a Capitalised Lease is recognised as both an asset and a liability (for the lease payments) on the balance sheet. Indicators that a lease is a Capital Lease include the transfer of ownership to the lessee, or an Option to purchase the leased property, at the end of the term. Also called a “finance lease”. Leases that are not Capitalised are called “operating leases”.

Question 27

Cash Flow Revolver

Answer 27

A Revolving Facility that provides the Borrower with a line of credit up to a fixed amount, in contrast to an Asset-Based Loan, which is based on the value of certain categories of the Borrower’s assets as of a given time. A Cash Flow Revolver typically contains fewer ongoing reporting requirements than an Asset-Based Loan. In a Cash Flow Revolver, the Lenders will focus on a Borrower’s ability to cover debt service by generating cash flow, whereas in an Asset-Based Loan, the Lenders will focus on the value of certain categories of the Borrower’s assets (in particular, the categories that are used in the Borrowing Base), especially the liquidation value of those assets, relative to the Lenders’ exposure under the loans (this is known as Collateral coverage).

Question 28

Club Deal

Answer 28

Historically, a smaller loan premarketed to a group of relationship banks which agree to Take and Hold the loans from the outset with no intention to reduce the commitment to lend through a subsequent Syndication. More common in Bear Markets as banks do not want to take underwriting risk. The term Club Deal can also refer to a very large Sponsor LBO transaction where multiple Sponsors pool together in order to buy a multibillion dollar company.

Question 29

Commercial Letter of Credit

Answer 29

A Letter of Credit the purpose of which is to provide a means of facilitating payments between parties in the normal course of business. Commercial Letters of Credit are therefore intended to be drawn on and used routinely by the parties. Compare Standby Letter of Credit.

Question 30

Commercial Paper

Answer 30

An unsecured debt instrument issued by a company to finance short-term liabilities. Commercial Paper has a maturity of less than one year from the date of issue.

Question 31

Convertible Bond

Answer 31

A Bond that is convertible into another Security, typically Ordinary Shares.

Question 32

Convertible Preferred Equity Certificate

Answer 32

PECs that are convertible into Equity interests.

Question 33

Covered Bonds

Answer 33

General non-deposit obligation Bonds of the issuing bank secured by cash flows from mortgages or public sector loans that remain on the bank’s Balance Sheet. This is essentially a corporate Bond with recourse to a pool of assets that “covers” the Bond if the Issuer becomes insolvent; the Issuer must continuously ensure that the asset pool sufficiently backs the Covered Bond and, upon default, the investor has recourse to both the pool and the Issuer. If the issuing bank becomes insolvent, the assets in this pool are separated from the issuing bank’s other assets solely for the benefit of the covered Bondholders. Covered Bonds are similar in many ways to residential mortgage Asset-Backed Securities, with the major difference being that the loans backing a Covered Bond are also guaranteed by the bank.

Question 34

CPEC

Answer 34

Convertible Preferred Equity Certificate

Question 35

Credit Agreement

Answer 35

Another name for a Facility Agreement.

Question 36

"D" Loan

Answer 36

Another name for a Facility D Loan.

Question 37

Daylight Facility

Answer 37

A Facility which is borrowed and repaid on the same day, most commonly used to facilitate intra-group reorganisations.

Question 38

Delayed Draw Term Facility

Answer 38

A Term Loan Facility that is available to be drawn, usually subject to a list of specified conditions, at a certain point subsequent to the Closing Date, or at various times for a period subsequent to Closing. A Delayed Draw Term Facility is often intended to be used for acquisitions or Capital Expenditure programmes. See Acquisition Facility and Capex Facility.

Question 39

Discount Notes

Answer 39

Notes that are issued for less than their face amount (Par Value). The important thing to remember is that although the Notes are issued below their face amount, the Issuer owes the face amount of the Notes when they mature. This means a holder of the Discount Note receives a return both off the Interest payment or Coupon (if there is one) and by having paid less than it will receive back at maturity. A Discount Note has an Accreted Value on the date it is issued equal to what was paid for it. The Accreted Value creeps up over time to equal the Par Value of the Note. This creeping is called “accreting” and is treated as Interest expense to the Issuer and Interest income to the Bondholder.

Question 40

Disqualified Stock

Answer 40

Any stock which is or could be redeemable prior to the maturity date of the Bonds plus a number of days (typically 91 days).

Question 41

Distressed Debt

Answer 41

Debt trading (well) below Par due to concerns about the financial health of the Borrower. See Loan To Own.

Question 42

Distressed Exchange Offer

Answer 42

An Exchange Offer for the debt Securities of a company that is undergoing financial hardship and likely will not make its next Interest payment without undergoing a debt restructuring.

Question 43

Drive By

Answer 43

Outside of the criminal context, a Bond deal that is priced the same day it is announced (with very limited marketing).

Question 44

Dual Currency Bond

Answer 44

An issue of Securities denominated in one currency but where Interest and/or principal is repayable in another currency.

Question 45

ECP

Answer 45

Euro Commercial Paper, issued only to European investors. See Commercial Paper.

Question 46

EMTN

Answer 46

See Medium Term Notes.

Question 47

Equity Linked

Answer 47

Securities either convertible into, or with Warrants to purchase, Equity interests of the Issuer or another company.

Question 48

Eurobond

Answer 48

Generally used to describe a Bond issued in a currency other than the currency of the country or market of the Issuer. A Eurobond is issued pursuant to Reg S and governed by English law with few or no Covenants. Quoted Eurobond also has an additional, separate meaning in a UK tax context, as payments of Interest on a “quoted Eurobond” are not subject to UK Withholding Taxes on Interest. A quoted Eurobond for these purposes is a Security which is issued by a company, is listed on a “recognised stock exchange” and carries a right to Interest (there is no stipulation as to currency in this context, in contrast to the alternative meaning previously described).

Question 49

Exchange Notes

Answer 49

The first thing to know about Exchange Notes is that they are not the actual Bonds the Issuer intends to sell to finance the purchase of the Target (although the terms of the two are similar). So what are they? After the Bridge Loans mature (generally in one year), they automatically convert into Term Loans (if the Bridge Loans have not yet been taken out). These Term Loans can then be “flipped”, generally at the option of a certain percentage of the Term Loan holders, into Exchange Notes, which are High Yield Notes, generally with Call Protection. Note that in some bank forms, Bridge Loans flip automatically into Exchange Notes one year after the Bridge Loan Closing (i.e., without an interim step as Term Loans). Note that Exchange Notes are not the same as Exchangeable Notes.

Question 50

Exchange Offer

Answer 50

An offering by an Issuer of new Securities issued in exchange for existing Securities of that Issuer.

Question 51

Exchangeable Notes

Answer 51

The term used for Convertible Bonds that are convertible into the stock of an entity other than the Issuer (typically a parent or other Affiliate of the Issuer). These are not the same as Exchange Notes.

Question 52

Exploding Bridge

Answer 52

A Bridge Loan that must be repaid at maturity. If not repaid, it doesn’t automatically convert to a Term Loan (like most Bridge Loans would), but explodes (well, not literally, but it does mean the Borrower is in Default). Fairly unusual, as it puts a lot of pressure on the Borrower to figure out how to repay the Bridge Loan before the clock runs out.

Question 53

Facility

Answer 53

A collective reference to the loans and commitments of the Lenders under a Facility Agreement. Examples of Facilities include: Revolving Credit Facilities, Term Loan Facilities, First Lien Facilities, Second Lien Facilities, Mezzanine Facilities and Bridge Facilities. Facilities can be Bilateral or Syndicated.

Question 54

Facility A

Answer 54

A Senior Secured Facility consisting of Facility A Loans.

Question 55

Facility A Loans

Answer 55

Term Loans that are structured to appeal to the commercial bank loan market — for instance, by featuring meaningful Amortisation. Prior to the entrance of institutional investors into the loan market in the early 1990s (at which point Facility B Loans and Facility C Loans became more popular), most Syndicated Term Loans were sold to commercial banks as Facility A Loans.

Question 56

Facility B

Answer 56

A Senior Secured Facility consisting of Facility B Loans.

Question 57

Facility B Loans

Answer 57

Term Loans that are structured to appeal to institutional investors (read “CLOs and hedge funds”) who are more focused on keeping their funds invested at attractive Yields than on Amortisation. Facility B Loans typically have no Amortisation, mature 12 months after the maturity of the Facility A Loans and have a higher Interest Rate than the Facility A Loans of the same Borrower.

Question 58

Facility C

Answer 58

A Senior Secured Facility consisting of Facility C Loans.

Question 59

Facility C Loans

Answer 59

Like Facility B Loans but maturing typically 12 months after and with a higher Interest Rate.

Question 59

Facility D

Answer 59

A Second Lien Facility consisting of Facility D Loans. So called because in Europe Second Lien Facilities were often structured as Senior Secured Facilities documented in the same Facility Agreement as Facilities A, B and C (the further Facility therefore became Facility D). The Subordination of Facility D to the other Senior Secured Facilities is typically achieved in the Intercreditor Agreement.

Question 60

Facility D Loans

Answer 60

Another name for Second Lien Loans.

Question 61

Firm Commitment Underwriting

Answer 61

The type of structure we see in virtually all underwritten deals, whereby upon signing the Underwriting Agreement, the Underwriters make a firm commitment to buy the Securities (rather than just agreeing to use their best efforts to find buyers for them).

Question 62

First Lien Facilities

Answer 62

These sit at the top of the Capital Structure. First Lien Facilities are Senior Secured Facilities (usually one or more Term Loan Facilities and a Revolver) that have a First Lien on the Collateral.

Question 63

Floating Rate Note

Answer 63

A Note with a Floating Rate. These protect investors against a rise in Interest Rates (which have an inverse relationship with Bond prices), but also carry lower yields than Fixed Rate notes of the same maturity. Often secured and used as Senior Debt (often in lieu of bank financing).

Question 64

Follow-On Offering

Answer 64

An offering of Common Stock / Ordinary Shares subsequent to the Initial Public Offering.

Question 65

Forward Start Facility

Answer 65

A Facility provided by some Lenders under an existing Facility and/or new Lenders (a significant amount of time before the Maturity Date of the existing Facility) which may be used solely to Refinance the existing Facility on its Maturity Date, thereby effectively extending the maturity of the existing Facility. Often used when an amendment to the existing Maturity Date can’t be obtained as that would require the approval of all of the Lenders under the existing Facility.

Question 66

Friends & Family Offering

Answer 66

Another name for a Sticky Offering.

Question 67

FRN

Answer 67

Floating Rate Note. Also, unhelpfully, sometimes mistakenly used to refer to a Fixed Rate Note.

Question 68

Gilt-Edged Securities / Gilts

Answer 68

A form of long-term government Bond issued in the United Kingdom, also known as Gilts. Gilts have a set maturity and accrue Interest at a Fixed Rate.

Question 69

Global Note

Answer 69

In the Bond world, the Issuer will sign a single note (or, more typically, at least two notes) at Closing for the entire Principal amount of the Securities. These Notes will be indirectly deposited with the Clearing System. The Clearing System will then allocate Book Entry interests in this Global Note.

Question 70

Green Bond

Answer 70

A Bond with similar characteristics to traditional Bonds that Issuers use to implement, emphasize, and finance their environmental responsibility strategies. Green Bonds may be issued by companies whose core activity is environmentally sustainable, companies seeking financing (or re-financing for) projects that have concrete environmental benefits, companies whose product or service is integral to other environmentally responsible products or companies seeking to acquire assets or businesses meeting the above criteria. Examples of environmentally responsible activities linked to Green Bonds include projects or business that, relative to current operations, reduce carbon emissions, reduce pollution, protect biodiversity, promote sustainable water usage or preserve natural resources.

Question 71

High Yield Bonds

Answer 71

Bonds rated below Investment Grade by the Ratings Agencies, but note that in emerging markets where Issuers may be rated below Investment Grade, their Bonds are often not strictly speaking High Yield Bonds in that the Covenant package and the structuring will be simpler.

Question 72

Holdco Debt

Answer 72

Debt at the Holdco level. Holdco Debt is an interesting creature. It is generally not Guaranteed by any of the Operating Companies below it. So from the Holdco Debt holders’ perspective, Holdco Debt is debt. But from the lower Operating Companies’ perspective, the Holdco Debt is essentially Equity — because payments on the Holdco Debt can only be paid with dividends up from the Operating Companies. The ability to incur new debt at a Holdco level depends on whether the Operating Companies’ Indentures and Facility Agreements restrict Holdco Debt and permit sufficient dividends to service the Holdco Debt.

Question 73

Hung Bridge

Answer 73

A Bridge Loan that actually has to be funded because the underlying Bond offering could not be accomplished within the Caps set out in the Commitment Letter and Fee Letter.

Question 74

Hybrid Security

Answer 74

Specifically, Securities which combine both debt and Equity characteristics. Hybrid Securities often pay a predictable Fixed or Floating Rate of return or dividend until a certain date, at which point the holder has a number of options including converting the Securities into the underlying share. More broadly, any Security that combines two or more different financial instruments.

Question 75

Incremental Facility

Answer 75

A feature in a Facility 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 Facility Agreement. Incremental Facilities are typically used to finance acquisitions, investments or even dividends. The existing Lenders do not pre-commit to provide the Incremental Facility, but do pre-approve the additional debt within agreed parameters, including the incremental leverage. At the time a Borrower desires to add on to the existing Facility, it must seek new commitments (from existing or new Lenders). Incremental Facility debt is additional Secured Debt that shares Collateral with the pre-existing First or Second Lien debt. Lenders focus intently on the amount of the pre-approved incremental 92 secured leverage because of potential implications for Credit Ratings and recovery. Further, if the loans under the Incremental Facility have terms that are more favourable to the incremental Lenders than the terms of the existing loans, then the existing loans may lose value as Lenders trade out of the existing Facilities and into the Incremental Facility. This is why Incremental Facilities sometimes include an MFN Pricing provision, so that if the Incremental Facility is priced more richly than the existing loans, the margin on the existing loans is automatically increased. Also of material relevance to Junior Debt holders as the Incremental Facility will rank ahead of them. Also known as an Accordion Feature.

Question 76

Institutional Term Loan

Answer 76

A Term Loan Facility intended to be sold to nonbank institutional investors. Historically, Institutional Term Loans have longer maturities and back-end-loaded repayment schedules or Bullet Maturities. See Facility B Loans and Facility C Loans.

Question 77

Interim Facility

Answer 77

The Facility made available under an Interim Loan Agreement.

Question 78

Intraday Pricing

Answer 78

Another name for a Drive By.

Question 79

Investment Grade Bonds

Answer 79

Bonds with an Investment Grade rating that traditionally have few or no Covenants other than a Negative Pledge.

Question 80

Jumbo

Answer 80

A very large Syndicated Facility.

Question 81

Junk Bond

Answer 81

Another name for a High Yield Bond or Non-Investment Grade Bond. “Junk Bond King” Michael Milken pioneered the use of Junk Bonds for corporate financing and M&A deals, but his novel approach to the interpretation of relevant legal regulations earned him a stint in US federal prison and a life-time ban from being involved in the Securities industry. Remember: one person’s junk is another person’s treasure.

Question 82

Loan Participation Note

Answer 82

A Bond issued by an off-shore SPV with a backto-back loan to a Borrower (the actual credit) such that payments of Interest and principal are paid from the Borrower to the SPV and on to Bondholders. The structure is limited recourse to the SPV and Security is granted over the SPV’s rights under the loan agreement with the Borrower in favour of the Trustee. Popular in Russia and some CIS countries.

Question 83

LPN

Answer 83

Loan Participation Note

Question 84

Margin Loan

Answer 84

A loan that involves the Borrower posting shares of a publicly listed company as Collateral to secure its obligation to repay the loan. If the value of the Collateral falls below a certain agreed minimum level, the Borrower is required to post additional Collateral pursuant to a Margin Call.

Question 85

Medium Term Notes

Answer 85

A debt instrument issued under an Medium Term Note Programme on terms that can be anything from fixed to floating, zero to dual currency, partly paid to instalment notes with any maturities though typically longer than one year and in any currency. In substance, a Medium Term Note has the same legal effect as a stand-alone Bond. See Medium Term Note Programme.

Question 86

Mezz

Answer 86

Shorthand for Mezzanine Financing.

Question 87

Mezzanine Facility

Answer 87

A Facility pursuant to which Lenders make Mezzanine Loans.

Question 88

Mezzanine Financing

Answer 88

A very different animal in Europe compared to the US. In Europe, Mezzanine Facilities are Syndicated bank loans secured on the same assets as the Senior Secured Facilities but are provided on a fully subordinated basis. In the US, mezzanine is an unsecured debt instrument with certain Equity-like characteristics, often issued at the Holdco level. In both markets, Mezzanine Facilities may have Equity features, frequently referred to as Equity Kickers, which may take the form of Warrants that permit the holder to purchase Equity at a pre-set price, or conversion features upon certain events (such as a Change of Control). The combination of the debt Coupon (split between cash pay and Pay-In-Kind in European Mezzanine Financings) and the Equity Kicker gives Mezz investors a higher potential return than High Yield Bonds. See also Subordinated Debt.

Question 89

Mezzanine Loans

Answer 89

Term Loans made available as part of a Mezzanine Financing. Mezzanine Loans typically have no Amortisation, mature 12 months after the maturity of the longest-dated Tranche of the Senior Secured Facilities and have a higher Interest Rate than the Senior Secured Facilities of the same Borrower. The Interest is typically a combination of cash and Pay-In-Kind.

Question 90

Mini Perm

Answer 90

In the context of a construction financing, a type of shortterm loan, typically three-to-five years, used by a Borrower to pay off construction financing or initial acquisition financing during the period a project is being completed or becoming stabilised as an income-producing asset. Borrowers enter into Mini Perms during this phase because longterm financing is not yet available as the project has an insufficient operating history. Mini Perms typically have Balloon Payments at the end of their terms that are intended to be Refinanced by long-term financing. In the context of coiffures, a Mini Perm is a partial perm that can be done to achieve body or curl in a particular area so that just the right amount of volume and control is obtained.

Question 91

Mirror Notes

Answer 91

Debt Securities with identical terms to another series of Bonds of the same Issuer but issued pursuant to a different Indenture such that they are not Fungible. Contrast with Tap Offering or Tack-on Offering.

Question 92

MTNs

Answer 92

Medium Term Notes.

Question 93

NGN

Answer 93

New Global Note. This structure must be used for newly issued international bearer debt Securities to be recognised as eligible Collateral for Eurosystem monetary policy and intraday credit operations. See also CGN.

Question 94

Notes

Answer 94

Another name for Bonds. Also sometimes used as shorthand for the Description of Notes.

Question 95

Pari Passu Bonds

Answer 95

Bonds which rank Pari Passu with the Facilities of the same entity/entities rather than being subordinated.

Question 96

PEC

Answer 96

Preferred Equity Certificates.

Question 97

Permanent Securities

Answer 97

The Securities (usually High Yield Bonds) that are intended to be issued to finance an LBO. These are the Securities that the Bridge Loans bridge in case the offering of Permanent Securities is unsuccessful or is unable to be consummated prior to Closing. Generally addressed in the Engagement Letter.

Question 98

Perpetual Bonds

Answer 98

Bonds that do not have a scheduled maturity date but that may be redeemable under a Call Option, with Events of Default typically being very limited and linked to Insolvency procedures.

Question 99

PIK Debt

Answer 99

Debt where Interest is only paid in PIK.

Question 100

PIK Loans

Answer 100

Loans that only pay Interest by way of PIK.

Question 101

PIK Notes

Answer 101

Perhaps the most common form of PIK Debt, being Notes with a PIK feature.

Question 102

PIK Toggle Notes

Answer 102

Notes with a PIK Toggle feature.

Question 103

Plain Vanilla

Answer 103

Either an issue of Securities or a Facility Agreement with no additional features over and above the usual Interest and redemption/ repayment provisions, such as Call Options, Warrants, instalments, etc. Also a much-loved flavour of ice cream.

Question 104

Preferred Equity Certificate

Answer 104

Hybrid instruments, usually issued by a Luxco, which are treated as debt for the issuing company and Equity for the holder with the Interest paid on PECs being treated as dividends in the hands of the holder. Can also be issued as instruments convertible into Equity — see CPECs.

Question 105

Primary Offering

Answer 105

An offering of shares by the Issuer itself (rather than by selling shareholders).

Question 106

Private Offering

Answer 106

Another name for Private Placement.

Question 107

Private Placement

Answer 107

A Private Placement of Securities (rather than a public offering) done pursuant to an exemption from Section 5 of the US Securities Act. See Section 4(a)(2) and Regulation D.

Question 108

Project Finance

Answer 108

A type of Limited Recourse Financing whereby debt is incurred by a project developer (known as the “project company”, which is formed by a “project Sponsor”), often in combination with Equity contributed by the project Sponsor, to finance the development and construction of a capital-intensive project, such as a power plant or toll road, typically by means of construction loans that later convert to Term Loans upon completion of the project. A primary feature of Project Finance is that the Lenders advance debt on the basis of their evaluation of the projected revenue-generating capability of the project, rather than the credit quality of the project Sponsor or the project company. The Equity of the project company and the project assets, including the project’s revenue-generating contracts and other cash flows, are pledged 136 as Collateral for the debt.

Question 109

Put Option

Answer 109

A financial contract between a buyer and a seller, where the seller has the right (but not the obligation) to sell a specific quantity of a Commodity, Security or other financial instrument to the buyer at a specified time and at a specified price. Also describes the option of Bondholders to require the Issuer to redeem the Bonds on a date earlier than the Maturity Date as described in the Bonds. Compare Call Option.