First lien meaning

Having emerged in 2011 by picking up the assets of a failed carrier at auction, and later expanding by buying a smaller carrier in a further insolvency sale, Silver Airways filed for Chapter 11 on 30 December 2024. A shift to a new aeroplane manufacturer badly disrupted Silver Airways' business and finances, driving the company to seek investments and loans from its parent and others, according to a first-day declaration by CEO Steven A. Rossum. Silver Airways' largest individual creditor is Versa Capital Management, the private equity fund that has owned it since 2017 and holds a $211m second-lien loan. In 2022 it issued $50m of convertible notes to Brigade Capital Management LP, an amount that swelled to $186m over two years. The terms of the Brigade loan provided that Silver Airways would be penalised with an increase in the loan's principal if it failed to make interest payments in cash, according to a bankruptcy declaration. A further $60m in unsecured debt rounds out the balance sheet in total...

Investors in high yield paper are now exerting a far greater influence on restructurings. Historically, despite high yield instruments appearing in a number of sizeable European corporate capital stacks, talks around restructurings were largely led by senior banks and other syndicated lending groups. The key reason was that high yield notes were frequently unsecured, offering minimal, if any, return on a winding-up, in contrast to leveraged loans, which are commonly secured. As a result, high yield holders generally wielded little sway over restructuring discussions. Strategy and types of holders Following the 2008 global financial crisis, leveraged finance has shifted towards greater use of high yield bonds, in part due to tighter leveraged lending rules and guidelines for loans. Alongside buoyant M&A propelling market expansion, European issuers have often tapped the high yield market to replace senior, mezzanine and second-lien leveraged loans, opting to refinance through notes rather than loans. These refinancings frequently meant the new high yield issuance shared security and guarantee packages comparable to the loans they...

What is second lien financing? Second lien financing describes funding that is principally backed by the same collateral package as senior or first‑ranking borrowings, yet it generally sits behind that senior or first‑ranking debt on a second‑ranking basis, whether in terms of payment priority and/or security (for more detail, see the Intercreditor position section below). It operates as a tranche of borrowing positioned between senior bank facilities and other junior or subordinated indebtedness within a leveraged buy‑out. Second lien borrowings are most often structured as term loans (or issued as notes in the US). The investor base for second lien instruments is typically institutional investors, encompassing funds that allocate to leveraged loans, collateralised loan obligations (CLOs), hedge funds, and other specialist debt funds...

This glossary sets out numerous expressions regularly encountered in the restructuring & insolvency sphere. Words shown in bold within definitions are themselves explained in other entries in this glossary as well. A Article X The MLIJ contains a single provision named Article X, aimed at jurisdictions that have already implemented the MLCBI, like England, or are weighing its adoption. Article X states: ‘Not withstanding any prior interpretation to the contrary, the relief available under [insert a cross-reference to the legislation of this State enacting Article 21 of the UNCITRAL Model Law on Cross-Border Insolvency] includes recognition and enforcement of a judgment’ (see Practice Note: UNCITRAL model law on recognition and enforcement of insolvency-related judgments (MLIJ): Article X). Asset-backed security (ABS) A form of security anchored by asset pools, for example loans, leases, and credit card receivables. Assimilated law From 1 January 2024, ‘retained law’ has been retitled ‘assimilated law’. The body of domestic law originally arising from EU obligations, created by the European...

Part 1, interpretation and limitation of liability This Part defines key expressions used throughout the articles and sets out how they are to be read. Terms such as articles, auditors, bankruptcy (including comparable overseas proceedings), board, CA 2006, certificated/uncertificated, chair, clear days, company’s lien, director, Disclosure Rules, FCA, FSMA, fully paid/paid, Official List, register of members, relevant officer, relevant system, UK Listing Rules, UKLA and writing are given specific meanings for consistent application. The model articles under section 20 of CA 2006 do not apply. Unless context dictates otherwise, words or expressions not defined here take the meaning given in CA 2006, or if absent there, in the Uncertificated Securities Regulations, as in force when these articles first bind the company. References to legislation include subordinate legislation and any amendment, extension, consolidation, re‑enactment or replacement then in force. Singular includes plural and vice versa; masculine includes feminine and neuter; references to persons include corporations. Liability of members: each member’s liability...