The Official Covenant Review Plain English Leveraged Finance and Special Situations Glossary

Oct 14, 2026

Plain English glossary explaining leveraged loan and high yield bond terminology and legal concepts that commonly appear across U.S. and European leveraged finance, including private credit, middle market, and direct lending contexts. The glossary defines key market phrases and conventions, clarifies how specific provisions and rules operate (such as redemption, registration, bankruptcy asset sales, and credit facility mechanics), and notes that the set of terms evolves over time with suggestions welcomed for updates.

LanguageEnglish

CategoryGeneral

FormatPDF

Pages80

Reading Time28 min

AccessFree to download

Introduction

Scope and purpose of the glossary

Selected defined terms

Ratio debt test and basket conventions

1.5 lien and lien priority layering

103 Call and redemption mechanics

Rule 144A and 144A-for-life concept

Bankruptcy code sales (Section 363) and credit bid

364-day facility and revolver structure

Core abbreviations (AAL, ABL, ABR, ABS)

Absolute Priority Rule and Acceleration

Research Date: March 31, 2026 The Official Covenant Review Plain English Leveraged Finance and Special Situations Glossary Introduction The world of leveraged loans and high yield bonds has a high barrier to entry. Jargon and legalese abound, seemingly designed to trip and confuse the unwary. This glossary is designed to address this inequality of information. It is intended to cover common terms with which every market participant should have at least a passing familiarity. Note further that this glossary covers both the US and European markets as well as private credit, middle market, direct lending, and high yield terminology. Of course, a fully comprehensive glossary is ultimately a fool’s errand. The market is always changing, always evolving, and with it, the terms used by participants will change and expand in turn. Fool’s errand or not, we encourage and welcome suggestions for future updates to the glossary; subscribers can reach out to [crgroup.research@covenantreview.com](crgroup.research@covenantreview.com.1)[.](crgroup.research@covenantreview.com.1)[1](crgroup.research@covenantreview.com.1) [--1--](--1--) “$1 of Ratio Debt Test” is a convention for imposing an Incurrence-Based test on a Basket by cross-referencing to Ratio Debt. It is usually drafted as a basket allowing some action so long as the company, after giving Pro Forma effect to such action, can still incur at least $1 under the ratio debt carveout. In the context of High Yield bonds , the term is traditionally equivalent to a 2x Interest Coverage Ratio or Fixed Charge Coverage Ratio (as this is typically the test applicable to an indenture’s ratio debt carveout) . It is, however, an undeniably silly way of writing a ratiobased carveout in the context of the BSL market, where ratio debt carveouts typically have different tests for pari passu debt, junior lien debt, and unsecured debt. “1.5 Lien” is a colloquial reference to debt that sits between first lien and second lien debt in terms of lien priority (typically incurred after such first and second lien debt) . Of course, 1.5 lien is just a naming convention. The reality is that 1.5 liens usually become the “true” second lien debt, with any existing second lien debt being pushed into third lien. Note that further layering can also result in such absurdities as “1 .25 lien” or “1 .75 lien” debt. “103 Call” is an Optional Redemption provision commonly found in secured HY bonds that permits the issuer to redeem 10% of the bonds during a specified period at a price of 103% . “144A” or “Rule 144A ,” is an SEC rule that provides a safe harbor for HY bond issuers to offer and sell bonds without SEC registration so long as the bonds are offered only to Qualified Institutional Buyers. The vast majority of HY bonds are issued without registration based on this safe harbor rule. 1 Note this glossary is an update and expansion of Plain English Translations: Frequently Used Loan Terms Glossary , originally published on March 2, 2020 and later expanded on April 25, 2024 and June 3, 2025. ANALYST CONTACT: [CRgroup.research@covenantreview.com](CRgroup.research@covenantreview.com) The Official Covenant Review Plain English Leveraged Finance and Special Situations Glossary “144A-For-Life” refers to a HY bond that does not have Registration Rights. In other words, the bond is issued without registration under Rule 144A and will never be SEC registered. --3-- “363 Sale.” A sale of assets under Section 363 of the US Bankruptcy Code that allows a debtor to sell the assets free and clear of any claims against those assets. 363 sales are often used to sell All or Substantially All assets on an accelerated timeline. Secured creditors generally have the right to Credit Bid in a 363 sale if the assets to be sold are their collateral. “364-Day Facility” is a form of Revolver, most commonly extended to Investment Grade borrowers, and which is typically unsecured. The revolving facility usually has

FAQs

What is the purpose of this plain English glossary?

It reduces information barriers by translating common leveraged finance jargon and legal phrasing into clearer explanations for market participants.

Does the glossary cover both U.S. and European markets?

Yes. It is intended to cover terminology used in both U.S. and European markets, including private credit and direct lending contexts.

How are terms updated over time?

The glossary acknowledges that markets change and terms expand, and it invites suggestions from subscribers for future updates.

Oct 14, 2026

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