Question

Which one of the following financing structures reflects the correct order of seniority in a leveraged...

Which one of the following financing structures reflects the correct order of seniority in a leveraged buyout transaction?

Select one:

Preference shares, term A, term B, Term C, mezzanine loan, common equity

Term A, term B, term C, preference shares, mezzanine loan, common equity

Term A, term B, term C, mezzanine loan, preference shares, common equity

Term A, term B, term C, preference shares, senior unsecured notes, common equity

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Answer #1

The answer to the question is

C) Term A, Term B , Term C , Mezzanine Loan, Prefference share, common equity

This is because the term A loan has higher protection with stricter covenants than term B and Term C. Mezzanine loan is generally more risky than term a, b and c and can be converted into equity. Prefference stock are the hybrod of debt and equity because of obvious characteristics

Equity owners are the real owners and are at the last portion of tranch and are generally financed by Private Equity, Hedge funds

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