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Sidecar Loan Agreements

Given the proliferation of incremental facilities in recent years, many sponsors and borrowers of companies that use incremental facilities (or at least negotiate optional facilities in facility agreements) will, subject to the agreement with the group of lenders of certain important commercial conditions, have a privileged form of incremental facility provisions with which they are convenient and convenient and convenient. , as a result, they use most of their loan financing operations. In this context, it remains to be seen whether or not the wording of the LMA is taken up in full or in part by the credit market, while the incremental facilities provisions that the LMA has included in its recommended form of agreement on loan-financed facilities do not seek to take into account all the potential relevant variables that can be seen in the current incremental facilities. they are a useful starting point, particularly for a number of business borrowers and for small and medium- and medium-sized enterprises. Traditional incremental facilities are generally made available to borrowers under the existing credit agreement and require incremental lenders who are not yet lenders to become parties to the existing credit facility. While these facilities are generally capped, a very limited number of large facilities offer unlimited incremental facilities. Typical terms of these loans are as follows: traditionally, the borrower`s ability to take on incremental debts was limited to a fixed dollar amount and was related to pro forma compliance with a maximum leverage ratio (usually the maintenance leverage ratio). In recent years, borrowers and sponsors have been able to negotiate maximum flexibility in credit contracts in order to take on debt and implement changes in the borrower`s capital structure. This flexibility is reflected in several recent trends in incremental investments: „free and clear“ incremental debt baskets, reclassification of free and clear incremental debt as quota-proportionate debt, incremental equivalent debt and limited conditionality for the use of incremental debt to finance an acquisition. Mr. Nahr represents investment banks, private equity sponsors, hedge funds and companies in a wide range of complex domestic and cross-border financial transactions. He has extensive experience in representing both borrowers and lenders in acquisition financing, debt-financed buybacks, recapitalizations and restructurings.

Mr. Nahr`s business includes advice on mezzanine financing, private placements and syndicated loans, as well as investment and equity financing. Listen to how our group of financial trade experts discusses current market trends regarding the use of incremental lending facilities and the important provisions that apply to the lender and borrower. In addition, many large-capital loans now allow a borrower who has committed to acquire without a financing commitment to choose the date of the acquisition contract (instead of the closing date) as the reference date for calculating leverage ratios to test the incremental capacity of the ratio-based debt. Examining the leverage ratio at the time of signing eliminates the risk of a decrease in the borrower`s EBITDA and the objective between signing and closing, if the report is tested. This risk is particularly significant for transactions that result in a long delay between signing and concluding on the basis of regulatory approvals. A new regulatory alignment with the debt-financed credit sector could have an impact in 2015 on incremental facilities and other conditions for loan-financed loans. The Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp have revised their 2013 Interagency Guidance on Leveraged Lending, which sets out the general principles of debt financing to avoid systemic risks to the financial industry. Large-scale borrowers



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