Highly Leveraged Transaction - HLT

AAA

DEFINITION of 'Highly Leveraged Transaction - HLT'

A bank loan to a highly leveraged company. HLTs can be thought of as similar to junk bonds as they both face default risk, but HLTs are more secure and have stronger debt covenants due to their structure.

HLT guidelines are set out by the U.S. Office of the Comptroller of Currency, the Federal Reserve Board and the Federal Deposit Insurance Corporation.

INVESTOPEDIA EXPLAINS 'Highly Leveraged Transaction - HLT'

For a loan to be classified as an HLT it must meet the following guidelines:

· loan financing used for buyouts, acquisitions and recapitalizations.
· loan financing which doubles the borrower's liabilities and results in a
leverage ratio greater than 50% or increase the leverage ratio higher than 75%.
· loan financing designated as an HLT by the syndication agent.
· loan financing to subsidiaries of highly leveraged companies, even if the subsidiary
does not meet the other HLT definitions.

RELATED TERMS
  1. Loan Syndication

    The process of involving several different lenders in providing ...
  2. Covenant

    A promise in an indenture, or any other formal debt agreement, ...
  3. Federal Deposit Insurance Corporation ...

    The U.S. corporation insuring deposits in the U.S. against bank ...
  4. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
  5. Debt/Equity Ratio

    A measure of a company's financial leverage calculated by dividing ...
  6. Junk Bond

    A colloquial term for a high-yield or non-investment grade bond. ...
Related Articles
  1. Fundamental Analysis

    Analyzing A Bank's Financial Statements

    A careful review of a bank's financial statements can help you identify key factors in a potential investment.
  2. Options & Futures

    Leveraged Investment Showdown

    Margin loans, futures and ETF options can all mean better returns, but which one should you pick?
  3. Bonds & Fixed Income

    The Impact Of An Inverted Yield Curve

    Find out what happens when short-term interest rates exceed long-term rates.
  4. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  5. Retirement

    The Best Way To Borrow

    There are many avenues from which to drum up funding. Find out the pros and cons of each.
  6. Mutual Funds & ETFs

    How do hedge funds determine what assets to own?

    Learn about the various types of investments that hedge fund managers use, and explore basic hedge fund management trading strategies.
  7. Savings

    What US banks offer the best savings accounts?

    Explore the best savings accounts offered by national banks comparing annual yield and other factors. Learn why the highest-yield accounts are offered online.
  8. Economics

    What's the highest year-over-year inflation rate in the history of the U.S.?

    Learn about periods with the highest inflation in U.S. history and the mandated role of the U.S. Federal Reserve in controlling inflation.
  9. Quantitative easing in Europe is coming, but too slowly to avert a severe slowdown and perhaps even a hard landing.
    Economics

    How Is Europe Affecting The Martkets?

    Quantitative easing in Europe is coming, but too slowly to avert a severe slowdown and perhaps even a hard landing.
  10. Economics

    What are the main components of the Federal Reserve's balance sheet?

    Find out which items are listed as assets and liabilities on the balance sheet of the Federal Reserve, and how to read the Fed's weekly financial report.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center