Buzz Archive:
Defining Intercreditor and Subordination Terms in Deal Negotiations

by Gary B. Rosenbaum, Partner, McDermott Will & Emery LLP, 6/16/2010

The overheated debt markets from 2003 to 2007 resulted in a record volume of buyout transactions by financial sponsors. The proliferation of second lien debt provided by hedge funds, private equity funds and other nontraditional investment vehicles like collateralized loan obligations satisfied the demand for leveraged debt created by these acquisitions. In contrast to traditional mezzanine indebtedness, second lien debt was less expensive and did not dilute the sponsor's equity ownership. In the current post-credit freeze era, second lien financing is disappearing, and mezzanine and other subordinated debt options are reemerging to fill the gap between senior loans and equity with a wide range of intercreditor and subordination terms.

Sound off on this buzz in the Comments Section.