Term loan
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In the world of leveraged finance, a term loan is defined as one of the types of syndicated loan facilities.
A term loan is simply an installment loan, such as a loan one would use to buy a car.
The corporate borrower may draw on the loan during a short commitment period, and repay it based on either a scheduled series of repayments or a one-time lump-sum payment at maturity (bullet payment). There are two principal types of term loans:
• An amortizing term loan (“A” term loans, or TLa) is a term loan with a progressive repayment schedule that typically runs six years or less. These loans are normally syndicated to banks along with revolving credits as part of a larger syndication.
• An institutional term loan (“B” term loans, “C” term loans or “D” term loans) is a term loan facility carved out for nonbank, institutional investors. These loans came into broad usage during the mid-1990s as the institutional loan investor base grew. This institutional category includes second-lien loans and covenant-lite loans.
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