Structuring Unitranche Facilities: Key Terms of AALs

Tranching, Payment Waterfalls, Interest and Fees, Voting, Buyouts, Standstill Provisions, Enforcement in Bankruptcy; LSTA Form

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

Conducted on Thursday, November 19, 2020

Recorded event now available

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Course Materials

This CLE course will discuss structuring and negotiating key terms of the agreement among lenders (AAL) in a unitranche facility, focusing on tranching, payment waterfalls, interest and fees skims, voting, buyouts, remedies, standstill provisions, and assignments. The program will also discuss the enforceability of AALs in bankruptcy and the new AAL form published in 2019 by the Loan Syndications and Trading Association (LSTA).

Description

Unitranche financing combines aspects of a traditional first-lien/second-lien structure into a single credit facility with one set of loan documents, one shared lien, shared (or "blended") interest payments, and one covenant package. The unitranche structure allows lenders to tailor their intercreditor rights depending on the size of their respective first-out and last-out facilities and other deal-specific factors in an AAL.

Key deal points include tranching, payment waterfalls, interest and fee skims, voting, buyouts, remedies, and standstill and assignment provisions. Amid a fast-growing market, the LSTA has published a form AAL for general use among unitranche lenders. As an attempt at reflecting the "market" for standard agreement provisions, the LSTA form offers a good starting point for drafting and negotiating an AAL.

Open questions regarding enforcement of AALs in bankruptcy include plan classification and voting, adequate protection, and the lender's entitlement to post-petition interest. Each lender's counsel must understand the AAL issues associated with these transactions.

Listen as our authoritative panel of finance counsel guides you through the current market terms of the AAL concerning the recently released LSTA form. The panel will also look at the latest developments in the enforceability of AALs in bankruptcy and other bankruptcy-related risks.

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Outline

  1. Structuring key provisions of AALs
    1. Tranching
    2. Payment waterfalls
    3. Interest and fee skims
    4. Voting
    5. Buyouts
    6. Remedial standstill
    7. Assignments
  2. Enforceability of AALs in bankruptcy and bankruptcy-related risks
    1. Recent case law developments
    2. Subordination
    3. Post-petition interest
    4. Credit bid provisions
    5. Plan classification
  3. The LSTA form of AAL

Benefits

The panel will review these and other key issues:

  • What are the essential terms to address between lenders in an AAL?
  • In what respects does the new LSTA form AAL reflect the "market," and how does it deviate?
  • What are the latest case law developments on the enforceability of AALs in bankruptcy?
  • What are the critical considerations in negotiating "split lien" AALs?

Faculty

Dutson, Jeffrey
Jeffrey R. Dutson
Partner
King & Spalding

Mr. Dutson is a financial restructuring partner in King & Spalding’s Atlanta office, with a focus on...  |  Read More

Misher, Jeffrey
Jeffrey Misher
Partner
King & Spalding

Mr. Misher specializes in leveraged finance, securitization and specialty finance. As a partner in our Capital Markets...  |  Read More

Shermohammed, Leia
Leia C. Shermohammed
Attorney
King & Spalding

Ms. Shermohammed's practice focuses on financial restructuring, bankruptcy, and other insolvency related matters.

 |  Read More

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