medium · Private Equity & LBOs

In a distressed restructuring, which class of security is known as the 'fulcrum security'?

1. A government-backed loan with super-senior status that is repaid first in bankruptcy.
2. The senior-most secured bank debt with first lien priority on company assets.
3. Common equity, which retains only a small residual 'hope value.'
4. The most junior debt class that is not fully covered by the enterprise value.

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