medium · Debt Capital Markets bond-instruments-structures
Why is the Second-Lien Term Loan market often referred to as 'pro-cyclical'?
- It is named after the 'cycle' of payments in the principal waterfall.
- The yields are indexed to the GDP growth rate of the borrower's home country.
- Issuance typically surges when market liquidity is high and risk appetite is strong, and disappears during downturns.
- Second-Lien lenders are required to increase their lending when the economy is in a recession.
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