Loans vs. Bonds: A Comparison of Serta Protection in Recent Secured Financings
Anthony P. Canale, J.D. Global Head of Research, Covenant Review
23 October 2025
Insights into Serta protection in secured financings, including:
- Loans vs. Bonds Structural Framework: Understand the fundamental differences in Serta Protection in Secured Financings and how covenant packages vary between loan and bond structures in today’s credit markets.
- Collateral Coverage Analysis: Explore how asset backing and security interests differ across recent secured financings, revealing critical protection levels for lenders and bondholders.
- Covenant Protection Comparison: Discover how maintenance covenants, incurrence tests, and financial flexibility provisions stack up between secured loan and bond transactions.
- Recent Market Trends: Analyze how Serta Protection in Secured Financings has evolved in response to market conditions, with real-world examples from recent deals.
- Risk Assessment Framework: Learn practical methods to evaluate relative value and downside protection when choosing between secured loan and bond investments in leveraged credit.
Executive Summary
- Indentures and credit agreements contain provisions that address similar concepts, sometimes in very different ways.
- In our Loans vs. Bonds series, we compare and contrast how some of these concepts are treated differently in high yield bonds and leveraged loans.
- In this report, we compare how Serta Protection in recent leveraged loans compares against the corresponding provisions of parity lien bonds issued as part of the same financing transaction in the U.S.
- Separately, we also review how often first lien bonds defer to the first lien credit agreement on whether guarantees and collateral can be released.
- On payment subordination, leveraged loans and high yield bonds were essentially the same in half of the financings, but where the terms diverged, the bonds were looser slightly more than the loans were looser.
- On lien subordination, leveraged loans were generally tighter than their parity lien bond counterparts, with nearly 60% of leveraged loans requiring affected holder consent to lien subordinate.
- Nearly all of the first lien bonds we reviewed in this report defer to the first lien credit agreement, and will automatically release guarantees and collateral if the applicable first lien credit agreement does so.
- Our new template, which we launched in September 2024, makes it much easier for our subscribers to understand what Serta Protection is available under the terms of the leveraged loans or high yield bonds they are reviewing.
