This is a simplification, but broadly speaking there are 2 "types" of DEBT: "bank debt" and "high-yield debt." There are many differences, but here are a few of the most important ones:

• High-yield debt tends to have HIGHER interest rates than bank debt (hence the name "high-yield").

• High-yield debt interest rates are usually FIXED, whereas bank debt interest rates are "floating" - they change based on LIBOR or the Fed interest rate.

• High-yield debt has incurrence covenants while bank debt has maintenance covenants. The main difference is that incurrence covenants prevent you from doing something (such as selling an asset, buying a factory, etc.) while maintenance covenants require you to maintain a minimum financial performance (for example, the Debt/EBITDA ratio must be below 5x at all times).

• Bank debt is usually amortized - the principal must be paid off over time - whereas with high-yield debt, the entire principal is due at the end (bullet maturity).

Usually in a sizable Leveraged Buyout, the PE firm uses both types of debt.Again, there are many DIFFERENT types of debt - this is a simplification, but it's enough for entry-level interviews.

This is a simplification, but broadly speaking there are 2 "types" of debt: "bank debt" and "high-yield debt." There are many differences, but here are a few of the most important ones:

• High-yield debt tends to have higher interest rates than bank debt (hence the name "high-yield").

• High-yield debt interest rates are usually fixed, whereas bank debt interest rates are "floating" - they change based on LIBOR or the Fed interest rate.

• High-yield debt has incurrence covenants while bank debt has maintenance covenants. The main difference is that incurrence covenants prevent you from doing something (such as selling an asset, buying a factory, etc.) while maintenance covenants require you to maintain a minimum financial performance (for example, the Debt/EBITDA ratio must be below 5x at all times).

• Bank debt is usually amortized - the principal must be paid off over time - whereas with high-yield debt, the entire principal is due at the end (bullet maturity).

Usually in a sizable Leveraged Buyout, the PE firm uses both types of debt.Again, there are many different types of debt - this is a simplification, but it's enough for entry-level interviews.