Second Lien Loan (or last-out participation) is a form of loan with a security interest in the assets of a company that are second in ranking behind a traditional senior credit facility. A lien is a form of security interest granted over an item of property to secure the payment of a debt.
The second lien lender will typically be required to agree contractually (through an intercreditor agreement or other contract) to subordinate its claims on the assets to the first lien secured lenders.
The vast majority of all second lien loans are senior secured obligations of the borrower. Second lien loans differ from both unsecured debt and subordinated debt.
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