Alphabet notes

Large loans or stretched senior debt ( www.practicallaw.com/A36917) which is divided into different tranches with different maturities, each tranche being identified by a letter of the alphabet: A, B, C and so on. Tranches of senior debt which are repayable after the principal tranche of conventional senior debt become known as the A Tranche. Typically, a B Tranche will be repaid in one amount eight years after completion (once Tranche A has been fully repaid) and Tranche C will be repaid in one amount nine years after completion (once Tranches A and B have been fully repaid). Since the life of these tranches is longer than the A Tranche, they will be priced accordingly: if Tranche A has a 2% margin, Tranches B and C will be priced possibly with 2.5% and 3% margins (respectively). The different tranches will usually rank pari passu between themselves unlike with a traditional senior-junior debt structure. In many ways, alphabet notes can take the place of mezzanine debt ( www.practicallaw.com/A36443) in a particular transaction.

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