Reporter David Bell covers changes in the leveraged loan market, including insight about the potential impact on high-yield from Pax World Funds Portfolio Manager Peter Schwab.
Read article at Reuters.
A Term Loan B is a term loan made by institutional investors whose primary goals are maximizing the long-term total returns on their investments. TLBs typically mature within six to seven years and have a small repayment schedule (usually about 1.0% of the principal amount of the loan per year, payable quarterly) during the term of the loan, with the remainder due on the maturity date. TLBs may provide that the Term B Lenders have the right not to accept prepayments of the loans. They may also have a prepayment penalty of between 1.0% and 2.0% if repaid within the first year. Interest rate margins on TLBs are typically higher than the interest rate margin on the initial Term Loan A (TLA) and any revolving credit loan under the same loan agreement. In US law-governed loan transactions, TLBs are senior debt and are usually not subordinated to other indebtedness of the borrower.1
An LBO, or leveraged buyout, is a buyout that involves a high level of borrowing, normally through using the assets of the buyout vehicle or target as security.1
BAML is Bank of America Merrill Lynch, the multinational investment bank division of Bank of America.
1Thomson Reuters Practical Law
Pax World Funds ("Pax") are advised by Impax Asset Management LLC, formerly Pax World Management LLC, a pioneer in the field of sustainable investing. Pax offers a diverse lineup of mutual funds focused on the risks and opportunities arising from the transition to a more sustainable global economy. Each fund integrates environmental, social and governance (ESG) research into the investment process to better manage risk and deliver competitive long-term investment performance. Since 1971, Pax has made it possible for investors to pursue financial returns while having a positive social and environmental impact.