It’s hard to know exactly when second-lien term loans first appeared in the leveraged loan market. According to S&P’s Loan Primer, they showed up in the mid-1990s, as the institutional market grew, and then vanished with the Russian debt crisis of 1998.

Our suspicion is these structures evolved from “over-advance” facilities in conjunction with asset-based loans, which were secured by priority liens on the current assets.

Regardless, the first such syndicated instrument to stand out in our memory was as part of J.W. Child’s financing of the acquisition of NutraSweet from Monsanto in March, 2000.

Led by Deutsche Bank, the $360 million financing consisted of a five-year $50 million RC, a five-year $100 million term loan A (sold to the banks), and a seven-year $160 million term loan B (sold to institutional investors). These facilities were collateralized by first-lien security interests in the assets of the company.