Senior debt

Senior debt is the highest-ranking financial obligation in a company's capital structure — repaid before any other financial creditors in case of default. It typically takes the form of term loans (TLA, TLB) or revolving credit facilities provided by banks or institutional lenders, secured by pledges on company assets and shares. In LBO structures, senior debt (typically 40–60% of acquisition price) forms the foundation of the leveraged financing stack, with mezzanine and equity ranking behind it. Senior lenders impose financial covenants including DSCR and leverage ratio tests.

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Example: in a CHF 50.0 million Swiss LBO, the senior debt structure comprises: CHF 20.0 million Term Loan A (amortising, 6-year maturity, SARON+220bps), CHF 8.0 million Term Loan B (bullet, 7-year maturity, SARON+280bps) and CHF 5.0 million revolving credit facility (undrawn). Covenants: net debt/EBITDA ≤ 3.5x, DSCR ≥ 1.25x. Total senior debt of CHF 28.0 million represents 56% of EV.

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Hectelion structures senior debt packages in LBO and acquisition financing mandates, modelling DSCR and covenant headroom across multiple scenarios.