medium · Corporate Credit Analysis ratings
In a stressed environment, why might a borrower find a TLA more difficult to manage than a TLB?
- The TLB's interest rate is usually fixed, providing a hedge against rising rates.
- Institutional lenders are more likely to sue the company than relationship banks.
- The TLA has 'soft call' protection that makes it impossible to refinance.
- The high mandatory amortization and maintenance covenants create constant liquidity and default pressure.
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