A Clash on the Credit Ladder

July 2005
Investment Dealers' Digest;7/25/2005, Vol. 71 Issue 29, p26
Trade Publication
The article focuses on the prospects of second-lien loan market in the U.S. investment industry. According to the author, the second-lien holders have heretofore agreed to waive many of their rights in inter-creditor agreements to get a valuable break in spreads. The issue has taken on greater urgency as the second-lien loan market has exploded, both in overall issuance and relative to institutional loan volume, to the point that it now touches the majority of leveraged deals. These securities have proven immensely popular with hedge fund and collateralized debt obligation managers who expect default rates to ratchet up, and are therefore reluctant to buy subordinated junk bonds. INSET: Meridian: The Test Case That Wasn't.


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