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

    The act of giving money, property or other material goods to ...
  2. Loan Syndication

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

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

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

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

    A measure of a company's financial leverage calculated by dividing ...
Related Articles
  1. Analyzing A Bank's Financial Statements
    Fundamental Analysis

    Analyzing A Bank's Financial Statements

  2. Leveraged Investment Showdown
    Options & Futures

    Leveraged Investment Showdown

  3. The Impact Of An Inverted Yield Curve
    Bonds & Fixed Income

    The Impact Of An Inverted Yield Curve

  4. The Importance Of Your Credit Rating
    Credit & Loans

    The Importance Of Your Credit Rating

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center