Debt Speak

Words and phrases only the debt markets could create

Add-on = When a company adds debt to a previously launched facility.

Amend and Extend = When a company amends its credit agreement and extends the debt maturities to avoid a default.

Amend and Pretend = A variation on “Amend and Extend,” this refers to investors agreeing to allow a company to amend its debt, because they don’t want to force it into a default and eventually bankruptcy, even though they know they are likely only delaying the inevitable. 

Bids-Wanted-In-Competition (BWIC) = When an institutional investor submits its bond bid list to various securities dealers. In a bids-wanted-in-competition situation, the dealers are allowed to make bids on the listed securities. The dealers with the highest bids are then contacted.

Big Boy Letter = A convention that allows investors in a loan syndicate to opt out of receiving information, such as sales projections, that may not be public. Having this information would restrict their ability to invest in or trade other securities issued by the same company.

Below the Bar = When a bank refuses to go below its threshold for a deal because a small deal can take as much work as a large one. The minimum size can be based on either potential fees or potential deal size, although the two are not always linked. Most large institutions will not do deals below $300 million in size. In a tough market this can change, but most banks focus on deals over $1 billion. At middle-market firms, the “bar” might be $25 or $50 million.

Bimbo = “Buy-In Management Buyout” describes a transaction where both incoming and existing management are involved in acquiring the target.

Bolt-on = An additional business “bolted on” to the target acquisition.

Chapter 22 = When a company goes into bankruptcy for a second time.

Credit Bidding = A right that secured creditors enjoy in bankruptcy auctions to bid the amount that they are owed. This allows them to control the collateral when it is worth less than what they are owed.

Fallen Angel = A company that has been downgraded from investment-grade to speculative-grade (Investopedia).

Financier Drexeliticus = A financial executive who was part of Drexel’s high yield bond team in the late 1980s. If one has trouble spotting a Financier Drexeliticus, as one source put it, “Search for the so-called smartest-guys-in-the-room talking amongst themselves after any significant financial disaster, and you’ll find a Financier Drexeliticus. Most have retired at least three times and continue to nurse a grudge against ‘the establishment,’ despite the fact that they now are the establishment.  None of them have ever owned a high yield bond in his personal account for more than two weeks.”

To Get Bageled = A term referring to the peak of the frenzied loan market when small investors would receive zero allocation on a “hot” deal.

Land of the Bunnies = A wild deal.

Loanasaurus = A banker, usually a graduate of a training program at a large commercial bank in the 1970s or 1980s, who regards the development of a secondary market for commercial loans with deep suspicion and nonbank involvement in the market as troubling. Loanasauruses are uncomfortable with any loan not controlled by an asset-based borrowing base, and for their personal account invest solely in treasury bills and short-dated municipal bonds.

Loan Participation = A transaction in which the original lender sells the rights and risks associated with a loan, but remains the lender of record. Loan participations account for an estimated 10% of cash loan trading in the U.S., and a far higher percentage in Europe.

Macaroni Defense = A tactic by which the target company issues a large number of bonds that come with the guarantee that they will be redeemed at a higher price if the company is taken over. It is referred to as a macaroni defense because if a company is in danger, the redemption price of the bonds expands, sort of like macaroni in a pot. This is a useful tactic, but the target company must be careful it doesn't issue so much debt that it cannot make the interest payments. (Investopedia)

Mullet = A “deaf, dumb and blind” investor.

One-go = When a salesman simply forwards an email from a trader to prospective investors, not really doing much selling.

Sandbag = When the target company stalls a potential acquisition, hoping a more favorable company will make a takeover attempt. (Investopedia)

The box in the space = A company with a recognized leadership position in a particular industry, i.e. Starbuck’s or Walmart.

Triple Hook = A triple-C-rated company or debt.

Toxic Waste = Securities that are so high risk and burdened with uncertainty that they are almost impossible to value.

Turn of Leverage = A turn of leverage refers to a company’s debt-to-Ebitda leverage ratio. For example, three turns means the company’s leverage ratio is 3x.

To add your “debt speak” to the list, please send your additions to