Full Stack
▲ Highest Priority (Senior)
Super senior revolver
DefinitionTop-priority secured revolver for liquidity, often borrowing-base, paid before other debt.
Priority Note: Carves out liquidity priority over term loans in bankruptcy.
First-lien term loan A
DefinitionAmortizing first-lien secured term loan, typically bank-held, senior to all junior liens.
First-lien term loan B
DefinitionInstitutional first-lien secured term loan, lighter amortization, usually longer tenor than TLA.
Priority Note: Covenant-lite version can shift pari or junior to A.
Second-lien term debt
DefinitionSecond-priority lien term debt on same collateral, subordinated via intercreditor agreement.
Priority Note: Collateral tweaks let it jump above unsecured notes.
Senior secured notes
DefinitionBond-format debt secured by collateral, ranks ahead of unsecured claims in recoveries.
Priority Note: Security package can rank above second-lien in opco deals.
Senior unsecured notes
DefinitionUnsecured notes, pari with other unsecured debt, junior to all secured obligations.
High-yield bonds
DefinitionSpeculative-grade bonds, often unsecured, higher coupon reflecting leverage and credit risk.
Priority Note: Collateral election moves them inside or outside secured stack.
Mezzanine debt
DefinitionJunior subordinated debt providing high returns. Classification: Debt, as it represents a contractual loan with a fixed maturity and interest obligation, distinguishing it from equity which represents residual ownership.
Priority Note: Warrants and PIK toggle let it sit above holdco paper.
Holdco mezzanine debt
DefinitionSubordinated debt issued at the holding company level. Classification: Debt, due to its contractual repayment obligation and maturity date, though structurally junior to operating company debt.
Priority Note: Guarantees or structural fixes pull it above pure holdco.
Equity Waterfall Begins
Tax equity investor interest
DefinitionEquity investment monetizing tax benefits, governed by partnership allocations and cash waterfall.
Senior preferred equity
DefinitionPreferred equity with senior liquidation preference and priority dividends ahead of other equity.
Priority Note: Dividend seniority clauses elevate it over junior prefs.
Junior preferred equity
DefinitionPreferred equity junior to senior preferred, paid after senior preference, before common.
Participating preferred equity
DefinitionPreferred equity with preference plus participation in residual upside alongside common equity.
Priority Note: Participation rights effectively boost ranking on upside events.
Convertible preferred equity
DefinitionPreferred equity convertible into common, combining liquidation preference with upside conversion option.
Priority Note: Conversion mechanics let it flip above or into mezz.
Common equity sponsor
DefinitionResidual ownership, last paid, highest upside, controls governance subject to preferences.
Seller notes
DefinitionDeferred purchase price note to seller, typically unsecured and subordinated to senior lenders.
Priority Note: Intercreditor agreement subordinates it contractually to debt.
Vendor financing
DefinitionSupplier-provided credit or financing terms, can tighten in stress, impacts liquidity and trade claims.
Priority Note: Vendor agreements push it below all bank debt layers.
▼ Lowest Priority (Junior)
Hybrid
▲ Debt Hybrids
Convertible Debt
Basis: DebtObligation to pay interest and repay principal at maturity if conversion is not exercised.
Mezzanine debt
Basis: DebtContractual loan with fixed maturity and interest, distinguishing it from equity ownership.
PIK Toggle Notes
Basis: DebtBond with a fixed maturity, though interest can be paid in-kind to preserve cash flow.
Equity Waterfall
Tax equity
Basis: EquityPartnership interest with residual claims and no mandatory debt maturity date.
Senior preferred equity
Basis: EquityOwnership interest lacking creditor rights and mandatory redemption dates.
Convertible preferred
Basis: EquityLacks a fixed principal repayment date; conversion path leads to common equity.
Warrants / Kickers
Basis: EquityDerivative right to purchase equity; carries no repayment obligation or maturity.
Seller notes
Basis: Quasi-EquityFunctionally equity in liquidation due to deep contractual subordination.
▼ Junior Equity Claims