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Direct Lending Terms and Documentation: Leverage Covenants, Incremental Financing, Guaranty Provisions

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Thursday, May 6, 2021

Recorded event now available

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This CLE course will analyze the terms and characteristics of direct loans and how they vary from syndicated loans. The panel discussion will include financial covenants, collateral and credit support typically required for direct loans, and how private equity lenders can tailor loan terms to each borrower.


Direct lending funds have evolved and expanded in recent years and are increasingly able to offer loan facilities that compete with more traditional lenders. Since direct loans are not typically syndicated, direct lenders have more flexibility to provide financing to companies with complex or atypical assets or liabilities. But there are distinct structuring and documentation features of direct loans which finance counsel must consider.

Direct loans may have more customized amortization terms--perhaps an interest-only period followed by accelerated amortization or a payment-in-kind feature where deferred interest payments are added to the principal. Financial covenants are more tailored to the borrower. They will usually include a leverage ratio-based financial maintenance covenant throughout the loan term (instead of the "covenant-lite" approach in syndicated term loans).

Depending on the borrower's future funding needs, a direct lender may offer a delayed-draw term loan commitment as part of the loan package. While syndicated lenders have generally excluded foreign entities as guarantors, direct lenders might include foreign subsidiary guaranties. Both features require enhanced underwriting of the borrower and guarantors and additional documentation not found in syndicated loans.

Listen as our authoritative panel discusses direct lending's nuances and how it can differ from syndicated lending.



  1. Private equity funds as lenders
  2. Features of direct lending and effect on documentation
    1. Flexibility to lend to unusual or complex borrowers
    2. Customized amortization
    3. Enhanced financial maintenance covenants
    4. Delayed draws post-closing
    5. Foreign guarantors


The panel will review these and other key issues:

  • What types of borrowers might prefer a direct loan to a loan which is to be syndicated?
  • How do amortization terms and financial covenants vary between direct loans and syndicated loans?
  • How are future funding commitments documented in a direct loan?
  • To what extent does the collateral package vary between a direct loan and a syndicated loan?


Cota, Alex
Alex Cota

Stroock & Stroock & Lavan

Mr. Cota is a debt finance partner practicing in the firm’s Financial Restructuring Group and serves as the...  |  Read More

Goldberger, Alon
Alon M. Goldberger

Stroock & Stroock & Lavan

Mr. Goldberger focuses his practice on a variety of complex finance transactions. He represents agents, lenders, public...  |  Read More

Patel, Milap
Milap Patel

Ropes & Gray

Mr. Patel advises lenders, private equity sponsors and their portfolio companies on leveraged finance transactions,...  |  Read More

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