Repayment of principal. The more senior the debt, the earlier it will be due to be repaid. Thus in a typical European leveraged financing, the senior debt will have repayment dates of between 7-9 years; second lien debt may be repayable after 9 1/2 years, and mezzanine debt after 10 years.

Interest margins. The more junior the debt, the higher the rate of return. Thus, while senior debt may earn margins of between 225-325 basis points, second lien debt typically earns margins of between 400-600 basis points, and mezzanine debt earns margins of between 800-1000 basis points.

Security. Senior, second lien and mezzanine debt will typically share the same security package (normally held by a security trustee), which means that the security granted by the borrower and any other obligors will be granted in favour of all the lenders under each of those instruments of debt. However, the intercreditor agreement between the lenders will provide that senior debt will be repaid first from the proceeds of any enforcement of security, followed by second lien debt, followed by mezzanine debt. High yield debt is typically unsecured (although it may benefit from guarantees).

Intercreditor terms. Terms in an intercreditor agreement (or any other financing agreement) by which one creditor (or group of creditors) agrees to subordinate itself in any way to another creditor (or group of creditors) are all examples of what is termed "contractual subordination". In this respect, the typical terms of second lien debt are likely to look similar to those of mezzanine debt. For example, it is common to see "payment blockages" (whereby senior lenders can prevent payments of junior debt - such as an interest payment which may be due - following a payment default under the senior debt) and "standstill periods" (whereby senior lenders can prevent junior lenders accelerating their debt for a specified period of time following a default under those loans).