The vocabulary of credit and venture debt, in plain language

A side contract between the holders of a unitranche that sets who is repaid first after trouble, who controls decisions in a workout, and whether the junior holder may buy out the senior. The borrower usually does not sign it.

Covered in Unitranche Loans and the Intercreditor Question

One hundredth of one percentage point, the unit credit markets use to quote yields and spreads. Talking in basis points avoids confusion when a rate moves by a small amount, since a change in percent can be read two ways.

Covered in High Yield Research When Rates Stay Higher

A formula that limits how much a company may draw on a loan to a set fraction of assets such as eligible receivables and inventory, recalculated regularly so the available credit rises and falls with those assets.

Covered in Why Middle Market Companies Borrow Differently

The difference between what a company planned to earn or spend and what actually happened. Read line by line over several periods, the pattern of these gaps shows how honestly a team plans and how reliably it executes.

Covered in What an Early Stage Lender Reads in Board Decks

The table in a bond's terms listing when the issuer may repay it early and at what price. The premium typically steps down over time until the issuer may retire it at face value.

Covered in Call Schedules and the Hidden Cap on High Yield

The full set of claims on a company, ordered by who is paid first. Senior loans sit at the top with the strongest claim and the cheapest price, and common shares sit at the bottom, keeping whatever remains after everyone above is paid.

Covered in Where Venture Debt Sits in a Middle Market Stack

The cash a business has left in a period after collecting from customers, paying its operating costs, funding working capital, keeping its assets in repair and meeting obligations that come first. It is the pool lenders are actually paid from.

Covered in A Credit Model That Starts With Cash

The time between paying for materials or inventory and collecting cash from the customer who eventually buys the product. A longer cycle ties up more money in the business and leaves less on hand for lenders.

Covered in Questions for Management That Change a Credit View

A loan requirement that a portion of the cash left over after operating costs and scheduled payments goes toward repaying the balance each year, shrinking the debt during good periods before any weak period arrives.

Covered in Disciplined Underwriting in Private Credit, One File

A bond term letting holders sell their notes back to the issuer, usually at a small premium, when the company gets a new owner. Conditions and exclusions often make it weaker than it first appears.

Covered in Reading a High Yield Indenture Before the Price

A term in a bond or loan that gives lenders rights, often repayment at a set price, if the borrower is acquired or its ownership shifts. It matters most in industries that merge often, where lenders can find themselves inside a new structure.

Covered in Three Lenses for Reading a Telecom Balance Sheet

A loan term requiring the borrower to tell the lender, and sometimes allowing the lender to act, if named executives depart or can no longer serve, so the lender hears about a leadership gap promptly.

Covered in Owner Dependence in a Middle Market Credit

The share of subscribers who cancel service over a period. In networks built years ago, each departing customer takes away revenue that was almost pure margin, so small changes in cancellations move cash flow far more than they appear to.

Covered in Fiber Overbuild and the Incumbent Credit

Several tenants renting space on the same structure, such as a wireless tower. Each added tenant brings rent while adding little cost for the owner, which is why shared sites tend to earn far wider margins than single tenant ones.

Covered in Tower Leases as a Credit Story

A limit within a borrowing base on how much credit can be supported by receivables owed from any one customer, so the loan does not grow too dependent on a single account paying on time.

Covered in Customer Concentration and the Middle Market Borrower

Holdings that look separate but would suffer from the same event, such as reliance on one customer or one source of refinancing. For sizing they should be treated as a single bet.

Covered in Position Sizing When You Might Be Wrong

The distance between a borrower's current results and the level at which it would break a financial covenant. Ample headroom gives a company room for a weak quarter. Thin headroom means a small miss can hand control to lenders.

Covered in Covenants That Still Matter in Private Credit

The degree to which a company depends on a small number of buyers for its revenue. High concentration can make sales look steady while leaving the business exposed to a single sourcing decision it cannot control.

Covered in Customer Concentration and the Middle Market Borrower

A failure by a borrower to meet a term of its debt, most often a missed interest or principal payment, but also a broken covenant. A default usually lets lenders demand repayment or renegotiate the terms from a stronger position.

Covered in Distressed Credit, Value or Value Trap

A market where prices have stopped reflecting value because sellers are compelled, buyers are scarce or information has broken down. Such stretches reward investors with capital, research and patience.

Covered in Active Management in Dislocated Markets, Scored

An equity raise priced below the company's previous round. It dilutes existing holders more than a flat round would and can trigger protective terms held by earlier investors, which is why founders sometimes borrow to avoid one.

Covered in When Early Stage Debt Beats Another Equity Round

A projection built to show how a borrower would fare if sales, margins and collections followed the worst stretch the company has actually lived through. Lenders size and shape loans so that this version still repays.

Covered in Disciplined Underwriting in Private Credit, One File

The window during which a borrower may take money from a committed facility. Anything not drawn before the window closes is lost, and later tranches are often available only once specific conditions have been met.

Covered in Reading a Venture Debt Term Sheet Line by Line

An adjustment that raises the earnings figure used in covenant tests, such as expected cost savings or charges described as one time. Too many addbacks let a weak company appear to pass its ratios.

Covered in Covenants That Still Matter in Private Credit

The worth of a business as a going concern, counting both its debt and its equity. Lenders to wireless operators often look at this whole figure instead of any single asset, because the assets are worth most when they keep working together.

Covered in Spectrum as Collateral and Why It Is Hard

A clause letting the owners fix a failed financial test by putting fresh cash into the company, which is then treated as if it were earnings for that period. Lenders usually limit how often it can be used.

Covered in Covenants That Still Matter in Private Credit

A lease term that raises the rent on a set schedule, either by a fixed step or by an index. It lets the landlord grow revenue each year on existing contracts without winning new business or spending more money.

Covered in Tower Leases as a Credit Story

The price per share a warrant holder must pay to turn the warrant into stock. When it is fixed at an early round price and the company later grows, the gap between that price and the later value becomes the holder's gain.

Covered in Warrants in Venture Debt and What They Cost

The amount a holding is likely to lose if the idea behind buying it turns out to be mistaken. It is smaller than the total wipeout case and serves as the starting point for choosing a position size.

Covered in Position Sizing When You Might Be Wrong

An owner who must sell because of a rule, a deadline or a cash need rather than a view on value. Their selling can push prices away from worth and create openings for patient buyers.

Covered in Contrarian Positioning Without the Hero Story

The class of debt in a troubled company where the available value runs out, so it is only partly repaid. Its holders usually trade their claims for most of the new shares and control the restructured business.

Covered in The Fulcrum Security and Where Recovery Lands

The number of shares that would exist if every option, warrant and convertible instrument were turned into stock. Ownership figures measured against this count show what each holder would really own at a sale.

Covered in Warrants in Venture Debt and What They Cost

The part of a spending program that internal cash cannot cover once dividends are paid. It must be filled with new borrowing, new shares or asset sales, and its size relative to the balance sheet is a central credit question.

Covered in Utility Capital Plans and the Credit That Funds Them

A bond promise that only bites when the issuer takes a specific action, such as new borrowing or a dividend. The company need not hold a ratio continuously, only pass a test when acting.

Covered in Reading a High Yield Indenture Before the Price

A measure of how comfortably a borrower's earnings or cash flow pay its interest bill, usually expressed as a multiple. It ignores scheduled principal, so a company can show healthy coverage while still struggling to amortize its debt.

Covered in A Credit Model That Starts With Cash

The early phase of a term loan in which the borrower pays interest but no principal. It keeps monthly cash cost small while a company works toward a milestone, and its length often decides whether a loan helps or hurts.

Covered in When Early Stage Debt Beats Another Equity Round

The widening gap in outcomes between individual borrowers in the same credit market. When money costs more, strong companies absorb it while weak ones struggle, so issuer selection matters more.

Covered in High Yield Research When Rates Stay Higher

The chance that a business loses much of its value if one individual, often the founder, leaves, falls ill or dies, because customers, pricing knowledge and decisions depend on that person rather than on the organization.

Covered in Owner Dependence in a Middle Market Credit

Total debt divided by a measure of annual cash earnings, used to gauge how many years of earnings the debt represents. A higher ratio means less room for error if earnings fall, and lenders often cap it by covenant.

Covered in Disciplined Underwriting in Private Credit, One File

How long a company can keep paying its bills from cash it can actually reach plus credit it can truly draw, usually counted in weeks when the business is under strain.

Covered in Liquidity Runway in a Stressed Balance Sheet

An increase in the amount of power customers draw from a utility system. It adds sales over time but usually requires new wires, substations and supply first, so it tends to raise borrowing before it raises income.

Covered in Data Center Load and Utility Balance Sheets

Spending needed just to keep existing assets working and competitive, as opposed to spending that expands the business. Separating the two shows how much operating cash is truly free for debt service, dividends or growth.

Covered in Three Lenses for Reading a Telecom Balance Sheet

A clause letting a lender refuse funding or declare a default if it decides the borrower's business has worsened significantly. Its vague wording makes it a lender's option, especially dangerous for companies expected to lose money for a while.

Covered in Reading a Venture Debt Term Sheet Line by Line

A period when a large share of a company's or a market's debt comes due at once. Borrowers must refinance, often at new rates, or find cash to repay it.

Covered in High Yield Research When Rates Stay Higher

Borrowing that ranks behind senior lenders but ahead of shareholders. It carries a high coupon, often partly added to principal instead of paid in cash, and usually includes some equity participation to reward the lender for its weaker position.

Covered in Where Venture Debt Sits in a Middle Market Stack

Runway measured by the result a company's cash can reach, not the months it lasts. Months tell you when payroll is at risk; the named result tells you whether the company can reach the evidence its next investor needs.

Covered in Runway Before the First Institutional Round

A loan term requiring the borrower to keep at least a set amount of cash on hand. Falling beneath it counts as a default, so lenders track the distance between current cash and the floor in every monthly report.

Covered in What an Early Stage Lender Reads in Board Decks

A contract term requiring a large customer to pay a set amount whether or not it uses all the capacity it asked for. It protects the supplier that built assets on the customer's behalf from paying for idle equipment.

Covered in Data Center Load and Utility Balance Sheets

The lopsided price behavior of a callable bond: it gains little when conditions improve because the issuer can redeem it, yet loses fully when conditions worsen and the issuer keeps it outstanding.

Covered in Call Schedules and the Hidden Cap on High Yield

The cash a company loses in a month after counting what it collects from customers. It is the figure most runway calculations divide into the cash balance, and it can shift simply because costs or receipts are reclassified.

Covered in Runway Before the First Institutional Round

A small payment offered to junior holders who would otherwise receive nothing, given so they stop delaying a restructuring. It reflects their power to slow the deal rather than any real claim on value.

Covered in The Fulcrum Security and Where Recovery Lands

Construction of a second network along routes an existing provider already serves, so that households gain a choice. For the original provider it usually means price pressure, lost subscribers and extra spending to keep the customers that remain.

Covered in Fiber Overbuild and the Incumbent Credit

The face amount of a bond or loan, the principal the borrower promises to repay at maturity. Prices are quoted relative to it, so a bond trading under par costs less than the amount the holder will be repaid.

Covered in Call Schedules and the Hidden Cap on High Yield

A Latin phrase meaning on equal footing. Debts described this way share the same rank in repayment, so if there is not enough to go around, each holder receives the same proportion of what it is owed.

Covered in Reading a High Yield Indenture Before the Price

Owning a whole market in proportion to its weights instead of choosing holdings. It is cheap and usually hard to beat, but it buys whatever the market prices, sensible or not.

Covered in Active Management in Dislocated Markets, Scored

The sequence in which a struggling company's claims get paid from the value it has. Each class must be covered before the next one down receives anything, so rank largely decides who recovers.

Covered in The Fulcrum Security and Where Recovery Lands

A specific allowance written into a credit agreement that lets the borrower do something otherwise restricted, such as borrow more, pay owners or sell assets, up to a stated amount. Loose baskets can quietly weaken a lender's protection.

Covered in What Equity Research Teaches a Credit Analyst

A promise by the owner of a company to repay the loan from personal assets if the business cannot. It is common for midsize borrowers and gives the owner a direct stake in how the credit performs.

Covered in Why Middle Market Companies Borrow Differently

A charge owed when a loan is repaid ahead of schedule, usually stepping down with time. It protects the lender's expected return but can penalize a borrower who raises equity, sells the company or refinances cheaply.

Covered in Reading a Venture Debt Term Sheet Line by Line

An instruction to sell a holding once it falls to a chosen price. It caps losses mechanically, but it can also force an exit from a sound position simply because the market disagrees for a while.

Covered in Contrarian Positioning Without the Hero Story

A right, often given to the junior lender in a split loan, to buy out the senior piece at face value plus interest once problems begin, so a disagreement over strategy can be resolved by one party taking full control.

Covered in Unitranche Loans and the Intercreditor Question

The share of the amount owed that a creditor eventually gets back after a borrower fails to pay, whether in cash, new debt or equity. It depends on asset values, the claim's rank and how negotiations among creditors resolve.

Covered in The Fulcrum Security and Where Recovery Lands

What a creditor ultimately receives on a claim after a default or restructuring, measured against what it was owed. It depends on what the assets are worth, where the claim ranks and how the negotiation goes.

Covered in Distressed Credit, Value or Value Trap

The chance that a borrower cannot replace maturing debt with new debt on acceptable terms, or at all. It rises when large maturities arrive close together, when markets are shut, or when the company's results have weakened.

Covered in Liquidity Runway in a Stressed Balance Sheet

A loan term that limits how much cash a borrower may send to its owners through dividends, distributions or share buybacks while the debt is outstanding, keeping money in the business or flowing to repayment.

Covered in Covenants That Still Matter in Private Credit

Payments to owners or junior claims, such as dividends, share buybacks and certain investments, that a loan agreement or bond indenture limits. The limits keep cash inside the company, where it continues to support the debt.

Covered in What Equity Research Teaches a Credit Analyst

Debt that ranks first in line for repayment and is also backed by a pledge of specific assets. If the borrower fails, these holders have the strongest claim on both the collateral and the remaining value of the company.

Covered in Unitranche Loans and the Intercreditor Question

A separate company inside a corporate group that owns airwave rights and nothing much else. Lenders ask for a pledge of its shares because the rights themselves often cannot be pledged or handed to a creditor directly.

Covered in Spectrum as Collateral and Why It Is Hard

A private equity firm or similar investor that buys a controlling stake in a company, typically using borrowed money. The sponsor's equity sits beneath the debt, and its plans for the business shape how the loans are structured.

Covered in Why Middle Market Companies Borrow Differently

The weaker position of creditors of a parent company compared with creditors of its operating subsidiaries. Parent lenders are paid only from what the subsidiaries send upward after their own obligations are met, so they stand behind them in line.

Covered in Utility Capital Plans and the Credit That Funds Them

An arrangement under which one class of debt agrees to be repaid only after another class has been paid in full. Subordinated lenders accept a weaker claim on cash and assets and usually demand a higher return for it.

Covered in Where Venture Debt Sits in a Middle Market Stack

The payment conditions vendors extend to a company, such as how many days it has to pay an invoice or whether a deposit is required. Tighter terms from suppliers are often an early outside sign of financial strain.

Covered in Questions for Management That Change a Credit View

A single loan that replaces separate senior and junior debt, carrying one blended rate and one set of terms for the borrower. Behind it, the lenders may privately divide it into pieces with different priority.

Covered in Unitranche Loans and the Intercreditor Question

A subsidiary placed outside the reach of a bond's covenants. It can borrow and pay out cash freely, and assets moved into it may slip beyond what bondholders can claim.

Covered in Reading a High Yield Indenture Before the Price

The part of a company's cash that can actually be moved to pay bills when they fall due. It leaves out money trapped abroad, pledged to a lender, sitting in store tills or still clearing.

Covered in Liquidity Runway in a Stressed Balance Sheet

A plain statement of what borrowed money will pay for and when. For a growth loan it is the core of the credit case, because repayment depends on that spending producing a result the next investor or the business itself can fund.

Covered in Where Venture Debt Sits in a Middle Market Stack

A security that looks cheap against some measure of worth that turns out to be illusory, so the price keeps sliding. The discount was a warning about the business, not an opportunity.

Covered in Distressed Credit, Value or Value Trap

The size of a lender's warrant, expressed as a portion of the loan amount and converted into a share count at a set price. Whether it is measured on the committed facility or only the drawn balance changes its cost considerably.

Covered in Warrants in Venture Debt and What They Cost

A rolling spreadsheet listing expected receipts and payments week by week, ending in a projected cash balance. For a troubled borrower it shows the exact week money could run short.

Covered in Liquidity Runway in a Stressed Balance Sheet

The smallest return a bond can deliver across every date the issuer might redeem it and its final maturity. It assumes the borrower picks whichever outcome is least favorable to the investor.

Covered in Call Schedules and the Hidden Cap on High Yield