Incremental Financing and Syndicated Facilities: Lender Protections When Accommodating New Debt

Accordion, Incremental-in-Lieu Debt and Ratio Debt Baskets, MFN Provisions, Guarantees and Collateral Requirements, Maturity Limitations, and Other Considerations

A live 90-minute premium CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Thursday, January 19, 2023

1:00pm-2:30pm EST, 10:00am-11:30am PST

Early Registration Discount Deadline, Friday, December 23, 2022

or call 1-800-926-7926

This CLE webinar will explore the issues borrowers and creditors should consider in analyzing and documenting new debt under syndicated credit facilities. The panel will discuss accordion and incremental-in-lieu provisions and ratio debt baskets, which allow new lenders to benefit from a pari passu lien on the collateral without negotiating new intercreditor arrangements. The panel will also discuss lender protections in existing credit structures that may influence the economic and non-economic terms available for a borrower focused on raising new financing in the current credit environment.

Description

Borrowers currently face rising interest rates and other macroeconomic factors that limit their new financing options. Flexibility in existing loan agreements may allow private credit providers to fill the gap left by traditional lenders, but the parties should understand how such financing fits into an existing credit arrangement and what amendments and consents may be required.

Incremental financing is commonly implemented pursuant to one or more of the following provisions: (1) the accordion, (2) the incremental-in-lieu basket (usage of which reduces accordion capacity on a dollar-for-dollar basis), (3) the ratio debt basket, and (4) the acquisition debt basket. If a borrower has capacity for additional first lien debt pursuant to one of the foregoing baskets, it will have to find a lender willing to provide the quantity and type of financing it seeks, taking into account implications for existing debt.

Given current volatility, creditors may now require higher pricing, larger fees, and greater amortization, along with other pro-lender terms--some of which may be more favorable to the new lender compared to existing lenders. Counsel should carefully review the relevant definitions and component defined terms, the rules of construction, the lien covenant if secured debt is being incurred, and other sections within the credit documents and intercreditor agreement to ensure the additional facility is permitted on the desired terms.

Key protections for lenders may include most favored nation (MFN) pricing and terms provisions, requirements regarding loan maturity and prepayment terms, additional guarantee and collateral requirements, and limitations with respect to financial maintenance covenants.

Listen as our authoritative panel discusses the nuances of evaluating and documenting additional debt for private equity funds and companies with existing facilities in effect.

READ MORE

Outline

  1. Overview of current leveraged finance climate
  2. Types of additional financing
    1. Incremental financing
    2. Incremental equivalent debt
    3. Ratio debt
    4. Acquisition debt
  3. Lender protections
    1. MFN pricing
    2. MFN terms
    3. Loan maturity relative to existing debt
    4. Guarantees and collateral
    5. Non-guarantor sublimits
    6. Mandatory prepayments
    7. Financial covenants
  4. Modifications to existing loan agreements to accommodate incremental financing
    1. Common lender asks to limit leakage, including J. Crew, Chewy and Serta provisions
    2. Borrower negotiations to permit operational flexibility

Benefits

The panel will review these and other critical issues:

  • How are current market forces affecting incremental financing terms in syndicated deals?
  • Which protections for existing lenders are commonly analyzed in light of incremental financing provided by direct lenders?
  • When are amendments or lender consents likely to be required in connection with a proposed financing?

Faculty

Tarr, David
David Tarr

Partner
Paul Weiss Rifkind Wharton & Garrison

A partner in the Corporate Department and a member of the Finance Group, Mr. Tarr focuses on finance transactions, with...  |  Read More

Thurmond, Monica
Monica K. Thurmond

Partner
Paul Weiss Rifkind Wharton & Garrison

Ms. Thurmond is a member of the Capital Markets and Finance Groups and former deputy chair of the Corporate Department....  |  Read More

Friedman, Joseph
Joseph Friedman

Counsel
Paul Weiss Rifkind Wharton & Garrison

A counsel in the Corporate Department and member of the Finance Group, Mr. Friedman focuses on representing private...  |  Read More

Attend on January 19

Early Discount (through 12/23/22)

Cannot Attend January 19?

Early Discount (through 12/23/22)

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

Download