M&A Bridge Financing: Key Terms and Structuring Considerations

Timing, Fees, Conversion Features, Securities Demands, Flex Rights, Remedies

This program has been cancelled

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


Wednesday, November 17, 2021

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


This CLE course will examine the structural components and key terms of bridge financing in mergers and acquisitions. The panel will discuss factors to consider in negotiating a bridge loan commitment and how the bridge loan can impact the ultimate financial structure of the transaction.

Description

Acquisition targets often will not accept a financing contingency in an acquisition agreement. At the same time, the bidder might require debt financing, which cannot be completed in time for the acquisition closing. Bridge loan financing can be used to facilitate a closing while long-term financing is still in process. Still, a bridge loan can add substantial costs to a transaction, and the terms and structure can be complex--they must be negotiated with care.

Because of its short-term nature, a bridge loan commitment will often include various fees and interest rate escalation clauses. To address the risk that permanent financing does not close, it may also include a conversion feature that allows the loan to convert into long-term financing in the form of a bond or a term loan with longer maturity and a higher interest rate (typically the coupon on the bridge loan plus a premium).

Bridge lenders can require the borrower to issue long-term debt securities to refinance the bridge loan into the capital markets. They will negotiate certain remedies if the securities demand fails to raise funds sufficient to pay off the bridge loan. These might include the right to vary the terms of the long-term financing to facilitate syndication or the placement of the debt securities.

Listen as our authoritative panel discusses the nuances of bridge financing in M&A and key terms an acquirer must consider when negotiating a bridge financing commitment.

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Outline

  1. Bridge loans in M&A: bridging the financing gap
  2. Fees and financial terms in the current market
  3. Conversion to longer-term loan if permanent loan financing falls through or is delayed
  4. Securities demand, remedies
  5. Flex provisions: potential effect on the permanent financing structure

Benefits

The panel will review these and other important issues:

  • Why is bridge financing often needed to close an acquisition, and who typically provides the bridge loan?
  • What fees are charged with a bridge loan, and how might they vary from deal to deal?
  • What events can trigger conversion of the loan, and why should the acquirer want to avoid conversion?
  • When can a securities demand be made, and what are the lender's remedies if the issuance of debt securities fails to result in a payoff of the bridge loan?

Faculty

Snare, Ellen
Ellen M. Snare

Partner
King & Spalding

Ms. Snare's practice focuses on finance. She represents lenders and borrowers in connection with debt...  |  Read More

Additional faculty
to be announced.