Negotiating EBITDA and Financial Covenants in Middle Market Loan Agreements
Recording of a 90-minute CLE webinar with Q&A
This CLE webinar will provide commercial finance counsel with a drill down on the uses and calculation of EBITDA in our evolving credit market. The panel will specifically identify common add-backs to EBITDA in standard middle market deals, as well as sponsored private equity deals.
EBITDA — the basic calculation
- The income statement
- Net income vs. EBITDA vs. free cash flow
- Possible alternative financial metrics (cash flow, net income, revenue)
- The business rationale for using EBITDA
- What is an add-back?
- Standard middle market/leverage finance add-backs
- Standard sponsored deal add-backs to EBITDA
- The negotiated add-backs
Uses of EBITDA in the loan agreement
- EBITDA covenant/leverage ratio/coverage ratios
- Excess cash flow sweeps
Determining covenant baskets
- Builder baskets
Determining applicable margin
- Interest rate matrix
- Financial covenants
- Equity cures
- Capital contributions/preferred equity
Calculating EBITDA for acquisitions and “stub” periods
- Pro-forma EBITDA
- Annualization and plug numbers
The panel will review these and other key questions:
- What is the market currently accepting?
- What are the differences, with respect to add-backs, between “big sponsor” deals and the middle market?
- At what stage in the documentation process should EBITDA be negotiated?
Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.
Brownstein Hyatt Farber Schreck
Mr. Spader has considerable work experience representing both borrowers and lenders in a wide variety of complex... | Read More
Mr. Spader has considerable work experience representing both borrowers and lenders in a wide variety of complex financing transactions, including significant experience drafting and negotiating loan agreements, security documents, inter-creditor agreements and commitment papers. On the borrower side, his practice has been focused on representing private equity sponsors and their portfolio companies principally in connection with leveraged buyouts.Close
Mark M. Oveson
Brownstein Hyatt Farber Schreck
Mr. Oveson represents a range of clients, including traditional banks, asset-based lenders, mezzanine lenders,... | Read More
Mr. Oveson represents a range of clients, including traditional banks, asset-based lenders, mezzanine lenders, special servicers and borrowers in sophisticated personal property, real estate, and structured finance transactions. He has completed corporate loan transactions in the energy, medical, manufacturing, distribution, retail and service industries. Regarding bankruptcy and workout transactions, Mr. Oveson represents lenders in DIP financings, workout negotiations, distressed-debt sales, Section 363 asset sales and forced liquidations. He also represents special servicers in CMBS workout transactions, including foreclosures, collections on guaranties, and receiverships.Close
Joanne Baginski, CPA, CMAA
Ehrhardt Keefe Steiner & Hottman
Ms. Baginski leads the firm’s Transaction Services Group. With over 20 years of public accounting and... | Read More
Ms. Baginski leads the firm’s Transaction Services Group. With over 20 years of public accounting and consulting experience, she serves clients in a variety of industries, including real estate, manufacturing and professional service corporations, and has significant expertise in M&A and financing.Close