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. Debt/Equity Ratio

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

    A colloquial term for a high-yield or non-investment grade bond. ...
  3. Federal Deposit Insurance Corporation ...

    The U.S. corporation insuring deposits in the U.S. against bank ...
  4. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  5. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
  6. Covenant

    A promise in an indenture, or any other formal debt agreement, ...
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. Economics

    What's the Federal Funds Rate?

    The federal funds rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements.
  7. Brokers

    Arbitrage Opportunities in Spread Betting

    While the opportunities are few and far between, investors may use arbitrage to take advantage of price differences in financial spread betting.
  8. Brokers

    The Exciting World Of The Top Spread Betting Brokers

    Spread betting can be fun, but it's risky and you will want a reliable broker. Here are the top spread betting brokers.
  9. Economics

    Evaluate Your Investment Portfolio For 2015

    The beginning of a year is a good time to evaluate your investment portfolio and think about how to position it going forward.
  10. Personal Finance

    What precise measures are implemented in most monetary policies?

    Read about some of the precise measures implemented in most monetary policies, and learn why monetary policy is considered important.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center