Common Terms

Trustee

US Bank is the trustee for all the lenders/Deals

LA

Loan Administration team

Primary responsibility is to book global/facility loan level activity based on notices we receive and apply cash

DA

Deal administration team

Primary responsibility is to reconcile cash on the individual lender side of the facility alone. This team manages the entire portfolio, making sure all our data ties with the client's data and the agent's data

CM/RM

Client Manager/Relationship Manager

Manages all legal aspects of the deal and coordinates the relationship between the client and U.S. Bank.

DDA Number

Direct Deposit Account
- The bank account for the CLO
- What flows in and out of the account

FFC Number

For Further Credit
- Stating where the money needs to be forwarded to from that DDA

Par

Position and what the loan owns

Cash

Actual cash, diff from par

Bank Loans

Arrangement where lender gives money to a borrower, borrower repays money along with interest in the future

Credit Agreement

Legal contract created by the bank outlining rules and regulations associated with the loan

Basis (base rate)

Number of recognized days in a year for the sake of interest rate calculation.

AKA day count convention

Index Rate

Variable interest rate tied to a specific benchmark

London Interbank Offered Rate (LIBOR)

World’s most used benchmark for short-term interest rate

Lack of transparency + volatility made SOFR/SONIA replace LIBOR

Euro Interbank Offered Rate (EURIBOR)

Used when loan’s demonetization is in euros

Prime

• Dependent on FFR set by the FED

• Consistent payments (usually quarterly) so if they have a history you can project payments

  • AKA alternate base, base

Sterling Overnight Interbank Average Rate (SONIA)

• Effective overnight interest rate paid by banks for UNSECURED transactions in British sterling market

  • Overnight funding for trades that occur in off-hoursSe

Secured Overnight Funding Rate (SOFR)

• Benchmark rate for loans replacing LIBOR

  • Average rate institutions borrow US dollars overnight while posting treasuries as collateral

Rate Set

Notice sent by agent bank with info about changes in rates and next payment date of contact

Interest Rate

Amount charged expressed as a percentage of a principal by a lender, usually listed as an annual percentage rate (APR)

• the spread/margin is a fixed rate

• interest is the spread plus the floating base rate

  • Interest = principal x all-in rate x (days/basis)A

All-in rate

Cumulative rate = base rate + spread

Principal Payments

Regular calculated payments based off the amount, interest rate, and longevity of a loan.

Amortization of a loan

Scheduled Fees

Paid regularly by the borrower for the guarantee of funds on a later date

AKA accruing fees

Commitment Fees

• Fee you pay just for having access to borrow money even if you don't use it yet

• Calculated on the total unfunded commitment of the loan

• Unfunded commitment x time x rate (defined in CA)

Unscheduled Fees

Paid by borrower due to occurrence of an activity or event

Amendment Fees

• paid when the CA is amended

• Aka consent/facility processing/extension fee on notices

Upfront Fees

• Paid when facilities are restructuring

• AKA Original Assurance Discount (OID)

Prepayment Fees

• paid if a facility is paid off before its maturity

• Would come in with a principal payment

Loan Trading

Trade direction, indicating a purchase of a loan asset or a sale, is received from the client via a trade ticket/trade packet, including a funding memo and assignment agreement

• Purchase: buying a certain par amount of an asset from another party

• Sale: selling a certain par amount of an asset that your client owns to another party

Assignment Agreement

Legal doc showing which deal/portfolio owns a particular asset and who the agent bank is

Primary Assignment

Piece of a loan that a profile holds at the specific agent bank

Participation

Portfolio doesn't have an assignment in the loan. Instead the portfolio only owns a piece in a loan

Agent Bank

Appointed to coordinate/communicate between lenders and borrowers

• we make sure funding is sent to the agent for the borrowing

Flow of funds (interest and principal payments)

Issuer → Agent Bank → Lenders (Trustees)

Flow of Funds (Borrowings)

Lender (Trustee) → Agent Bank → Borrower

Facilities

Loans

Main Types of Facilities

• Term loans

• Revolving credit lines

• Letters of credit

• Delayed Draws

Lien (First)

• Legal right for a creditor to sell the collateral property of a debtor who fails to meet obligations

• Ex. When an individual takes out an automobile loan, the bank becomes the lien holder.

• Lien is released when the loan is paid in full

Lien (Second)

Debts that are subordinated to the rights of other, senior debts issued against the same collateral

Commitment

total amount a borrower will be funded for the loan, whether now or in the future

Delayed Draw Fully Funded

turns into a term loan under the term category while the security type will still read DF

Split/Combine/Rollover (SCR

• Split: breaking a single loan into smaller loans

• Combine: merge multiple positions into one larger position

• Rollover: replace existing loan with a new one tied to the same borrower (new terms, maintain exposure, etc.)

Term Loan

• A fixed loan with a maturity of more than one year, providing the borrower with working capital

• Ex. Retail store gets term loan to acquire assets, order inventory, and finance equipment.

• pay principal regularly

PIK Loan

• Term loan where unpaid amounts are capitalized back into the principal balance with compounding interest

• Ex. Borrowers can avoid making cash outlays during the growth phase of their business, instead making interest payments where the interest payments get added to principal and compounded.

Revolver Credit

• credit line offered to a borrower until a final maturity date

• business credit card

  • borrow, repay, repeat

Letters of Credit (LOC)

• type of revolver where a bank guarantees that the borrower will make a payment to the seller on time for the correct amount or else the bank covers the full amount of the purchase

• Ex. Used for international trade due to the difference between laws and economies

Delayed Draw (DD)

• Commitment amount of the loan can be drawn in multiple borrowings during a specific availability period

• Ex. A business can borrow one million every quarter out of a ten million commitment.

• When availability period ends, the unpaid balance becomes a term loan with an amortization schedule or bullet

• draw downs only, then pay downs only

• draw once over time

Pro-rata Syndication

A group of lenders fund different PROPORTIONAL portions of a loan for a single buyer

Commitment Reduction

Paydown

Borrowing

DrawdownB

Bullet

one lump interest payment on maturity date

Total Commitment

unfunded commitment amount + funded commitment amount

Global Asset Management (GAM)

Assist in onboarding global data into CDO Suite. This includes entering new deal information, new asset information, and maintaining global integrity

Global Asset Reconciliation Team (GART)

Processes all global bond activity and non-cash transactions

BL Number

Internal unique identifier to identify an asset/facility

LX ID

Asset ID used widely on bank loans

Deal ID

Internal short name/unique identifier for the deal

CUSIP

Mainly used by agent banks to identify facilities/assets on notices

MEI Number

Commonly used by agent banks to identify a deal/lender