Anti-Layering Covenant (Financial Restructuring & Bankruptcy Glossary)

Summary

A clause that prevents an issuer from layering debt between the senior and subordinated debt. The provision precludes the company from incurring new subordinated debt unless that debt is also subordinated to the bonds, in order to ensure that high-yield bonds do not become subordinated to new debt incurred. An anti-layering clause is only used in senior subordinate transactions to ensure that subordinated debt occupies the second-class slot (and not the third or fourth).