Nature of Tranche B or "Second Lien" Loans

The Tranche B lender niche has evolved. Tranche B lenders used to review only a chosen borrower’s enterprise value or asset value to determine if it will exceed the value advanced against by a senior secured lender. Today, Tranche B lenders create a broad range of structured finance products to meet the needs of a borrower's circumstances and capital structure, rather than adhering to a strict borrowing formula. This article discusses Tranche B financing structures in detail.

Nature of Tranche B or "Second Lien" Loans

In today’s finance culture, it is common practice for equity and debt sources to implement capital structures for companies consisting of multiple layers – common and preferred stock, shareholder debt, subordinated/junior debt and senior debt. These sophisticated, multilayered structures put renewed focus on the relationship among capital providers and, in turn, highlight the importance of intercreditor agreements to that relationship. Recently, the