Incremental Financing and Syndicated Facilities: Borrower and Lender Considerations When Accommodating New Debt
Accordion, Incremental-in-Lieu Debt and Ratio Debt Baskets, MFN Provisions, Guarantees, Collateral Requirements, Maturity Limitations
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Banking and Finance
- event Date
Thursday, April 3, 2025
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
-
This 90-minute webinar is eligible in most states for 1.5 CLE credits.
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 noneconomic terms available for a borrower focused on raising new financing in the current credit environment.
Mr.Crane concentrates his practice on finance, restructuring, and bankruptcy matters. Prior to joining the firm, he served as a law clerk to the Honorable Sherry R. Fallon, magistrate judge of the U.S. District Court for the District of Delaware. Mr. Crane also held legal internships at the Securities and Exchange Commission and the Internal Revenue Service.
Mr. Swanson focuses his practice on representing banks, financial institutions, private equity firms, sponsors, and borrowers in structuring, negotiating, and documenting revolving and term loan facilities, senior and subordinated debt transactions, cash flow, and asset-backed financings, secured and unsecured lending, intercreditor arrangements, and acquisition financings. He also has experience representing both lenders and developers in complex real estate finance transactions, including New Markets Tax Credit, PACE financing, and municipal bond transactions.
Ms. Nand represents commercial, cooperative, development and investment banks, as well as hedge funds, sponsors, sovereign wealth funds and Fortune 500 companies in leveraged finance transactions. She has structured, drafted and negotiated over $40 billion of syndicated loan, commercial paper and project financings. Ms. Nand has served as lead counsel on numerous transactions, including cross-border credit facilities, securitizations, syndicated loan transactions, credit-linked notes, convertible debt facilities, private placements, joint venture financings and debtor-in-possession credit facilities. Ms. Nand is a fellow of the American College of Commercial Finance Lawyers.
Ms. Sonnenberg concentrates her practice in commercial finance, with a particular focus on asset-based and cash-flow financing for various industry sectors, including manufacturing, healthcare, and other service industries. She serves a wide range of clients, including banks, commercial finance companies, mezzanine lenders, and other institutional lenders, along with private equity firms, hedge funds, and publicly and privately held corporations in the following areas: commercial financing, asset-based financing, cash-flow financing, secured transactions, healthcare financing, real estate financing, and mortgage warehouse financing.
There are currently various issues borrowers face and 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 the 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.
- Overview of current leveraged finance climate
- Types of additional financing
- Incremental financing
- Incremental equivalent debt
- Ratio debt
- Acquisition debt
- Lender protections
- MFN pricing
- MFN terms
- Loan maturity relative to existing debt
- Guarantees and collateral
- Non-guarantor sublimits
- Mandatory prepayments
- Financial covenants
- Modifications to existing loan agreements to accommodate incremental financing
- Common lender asks to limit leakage, including J. Crew, Chewy, and Serta provisions
- Borrower negotiations to permit operational flexibility
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?
