Module IV· Debt TranchesBasic
Question
What is the difference between Term Loan A and Term Loan B?
Answer
| Aspect | TLA | TLB |
|---|---|---|
| Lender | Commercial Banks | Institutional (CLOs) |
| Coupon | SOFR + 350-400 | SOFR + 400-500 |
| Amortization | Amortizing 5-10% p.a. | Bullet or 1% p.a. |
| Maturity | 5-6 yrs | 6-7 yrs |
| Covenants | Maintenance (Quarterly) | Incurrence (Cov-Lite) |
| Ratings | not mandatory | often B/B+ |
| Secondary market | limited | active (Loan Trading) |
Bank-driven markets
TLA more dominant (bank market) or Unitranche.
Pitch tip
Sponsors like TLB for its lower amortization (cash preservation) — accepting a 50-100bps higher margin as the trade-off.