Are the following types of debt typically secured or unsecured in an LBO capital structure? High...

Are the following types of debt typically secured or unsecured in an LBO capital structure?

High yield bonds

Revolving credit facility

Term loan

Mezzanine debt

Equity

ABL facility

Expert Solution

1. High yield bonds are generally an unsecured way of raising debt. The higher risky characteristic of the bond is compensated by the high yield/ return. High yield bonds increase the leverage beyond the point where the secured lenders refuse to increase the leverage

2. Revolving credit facility- It is a form of senior bank debt which is typically secured. A company withdraws cash up to the credit limit and repays the revolver when extra cash is available.

3. Term loan- Its a secured kind of debt provided to companies for its needs. It is provided for a specific tenure and a specific amount. It has a specified repayment schedule with either fixed or floating interest rate.

4. Mezzanine Debt- It carries characteristics of somewhere in between debt and equity. It is the highest risk form of debt. Typically it is an unsecured form of debt.

5. Equity- It is an unsecured form of capital raised from equity holders.

6. ABL Facility- Asset-based lending facility is secured by the company's assets. It is a typical collateralized form of debt.

jeff jeffy answered 1 year ago

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