in leveraged buyouts to fill small gaps between the financing needs of the borrower and maximum thresholds (measured by various leverage metrics) of senior secured lenders. The arrangement fee and interest (finance) of a second lien loan are higher than those of the first lien secured loan of the same borrower because of increased risk for the lender that comes from a subordinated security interest. However, second lien debt can often reduce the overall cost of capital in a leveraged buyout transaction, replacing other more expensive forms of financing (e.g., senior unsecured debt). See also Negative pledge Pari passu Preferential creditor Seniority (finance) Senior debt Security interest Secured creditor Subordinated debt Unsecured creditor External links Second Liens: Borrower Beware Second Lien Financing Forum Linklaters. Banking Update. Second lien financings and the European loan markets. SECOND LIEN DEBT: A Guide to Key Terms and Inter-Creditor Issues The Borrowing Base with a Tranche B Loan Corporate finance Bankruptcy Legal terminology Credit Loans