Glossary

A stalking-horse bid is an initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company. From a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid. This method allows the distressed company to avoid low bids on its assets.

A type of cost accounting that uses ratios to compare efficient uses of labor and materials to produce goods or services under standard conditions. Assessing these differences is called a variance analysis. Traditional cost accounting essentially allocates cost based on one measure, labor or machine hours.

A standby letter of credit (SLOC) is a guarantee of payment issued by a bank on behalf of a client that is used as "payment of last resort" should the client fail to fulfill a contractual commitment with a third party. Standby letters of credit are created as a sign of good faith in business transactions and are proof of a buyer's credit quality and repayment abilities.

A sub-limit represents a limited portion within an overall capital structure or credit facility. Sub-limits generally represent (1) a limited portion of an overall credit facility that is available for a certain purpose or type of loan, such as a limit on the amount of letters of credit that can be issued under a revolving credit facility; or (2) in the context of an overall borrowing base or collateral formula, a limit on the amount that can be attributable to a certain asset class (such as inventory).

Represents one class of debt that is behind another class of debt in (1) the right to receive certain types of payment (e.g., interest and/or principal), and/or (2) claims to or liens on all or a portion of a common debtor’s collateral.

An agreement signed by creditors of a company that subordinate one creditor’s debt under the other (see: Subordinated Debt). This makes one lender more “Senior” in terms of amortization payments or in a bankruptcy case (i.e. in liquidation scenarios, the Subordinated lender would not be paid out until the Senior lender has received all of their money back)

The substitution of one creditor for another, whereby the substituted creditor (i.e., the newer creditor) obtains the legal rights and claims of the original creditor. This is often used by title insurers to acquire the right to sue from the injured party.

Represents a report of a company’s accounts payable broken down to the total balance due from each vendor, which are then further allotted between “buckets” based on date, whether that be Date from Invoice or Due Date aging (i.e. Current A/P, 30-60 DOI A/P, etc.).