Private credit

Debunking common myths about senior secured loans

October 17, 2024
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Key takeaways
Senior secured loans (SSLs)
1

SSLs are loans issued to below-investment-grade companies by a bank or similar financial institution.

Safety and priority
2

SSLs are secured by company assets and traditionally have the highest priority in repayment, potentially making them less risky than bonds.

Yield potential
3

SSLs have historically offered investors higher yields compared to traditional fixed income asset classes while also maintaining minimal duration risk due to the floating rate nature of the asset class.

Senior secured loans (SSLs) are often misunderstood by investors. Simply put, SSLs are loans issued to below-investment-grade companies by a bank or similar financial institution. SSLs have historically offered investors a diversified source of income potential that is secured by the assets of the company receiving the loan. 

Myths and realities of senior secured loans

For example, one common myth is that bonds may be safer than loans. But in reality, SSLs are secured by company assets and traditionally have the highest priority in repayment, potentially making them less-risky than bonds.

Understanding the nature of senior secured loans can help investors make informed decisions and potentially leverage the benefits of this often-overlooked asset class. Read our complete analysis in Senior Secured Loans - 10 Myths-Busted.

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