medium · Corporate Credit Analysis

A Second-Lien loan and Senior Unsecured bonds are issued by a Holding Company (HoldCo) with no assets other than the equity of its Operating Company (OpCo). If OpCo has its own Senior Secured debt, the HoldCo 2L and Unsecured debt are:

1. Both structurally subordinated to the OpCo debt, but the 2L is still senior to the Unsecured debt at the HoldCo level.
2. Pari passu because they both rely on the same OpCo equity value.
3. Junior to the Unsecured debt because secured debt cannot be issued at a Holding Company.
4. Effectively First-Lien because there is no other debt at the HoldCo.

Sign up free to see the explanation and track your rank →