DO your own math Second lien loans are used in
leveraged buyouts to fill small gaps between financing needs of the borrower and maximum thresholds (measured by various
leverage metrics) of
senior secured lenders. The arrangement fee and
interest (finance) of a second lien loan are higher than those of the first lien secured loan of the same borrower because of increased risk for the lender that comes from a subordinated security interest. However, second lien debt can often reduce the overall cost of capital in a leveraged buyout transaction, replacing other more expensive forms of financing