Who provides these debt products to the issuers? First, we need to understand that even within the term loan, we have many different types. The first term loan is called a term loan A. This is an old fashioned bank loan, and it is considered private debt in that a company seeking a bank loan can arrange this without a credit rating and without filing with the SEC. It is not a security in that sense. Because of all these attributes, the interest rates are very low. The term is usually shorter as well, five to six years. This also keeps risk low. The loans are also secured by assets and are senior in the capital structure. Banks will demand that these loans are repaid a little each year, something called loan amortization. The borrower is also watched vigilantly by the creditors to make sure they're meeting all obligations. These are called covenants. Banks that underwrite these loans will form a bank group or syndication and share the risk of the loan. Typically, one bank will not hold more than 25 to 40%. These types of loans are often called pro rata as the bank group that forms and takes pieces of the term loan will also be required to step up and take a pro rata share of the revolver. Revolvers or RCFs are very common in almost every company has one in place, if not for funding the day-to-day operations as a safety or backstop for the other debt in place.

RCFs share similarities with the term loan A in seniority security and in low cost. The leverage market has evolved over the years, and banks are not the only place to go for loans. Non-depository institutions also to companies, hence the term institutional loan. Banks might arrange these loans, but instead of holding them as with the TLAs, they will sell them immediately to hedge funds, insurance companies, finance companies, pension funds, et cetera. This group should look familiar as they're often called institutional investors. These investors are willing to accept a little more risk than the banks. The interest rates on these term loans, which are often called B, C, and D is higher. Despite that they are senior and secured as well. The risk comes in a few forms. One, they are slightly longer in duration at seven years. They do not amortize each year except for a tiny amount, typically about 1% per year, and these lenders require few, if any restrictions or covenants. This provides the borrower with a little more independence in exchange for a couple of hundred basis points of yield. We have another competitor for loan issuances, and those are now called private credit funds. These are similar to private equity funds, but with a focus on lending. In principle, this is the same kind of loan being made under a term loan B, so I will hold off on discussing private lenders for the moment. Lastly, we have a second lien loan. This is the first kind of loan here that moves us down the capital structure into a new category. Second, lien loans are senior, however, they have a second claim on the collateral being pledged, so that makes these loans a little more risky. The investors in these loans, which are the same as the institutional loans, are compensated for this risk.