Trusted By:
0 Part Course  | 
Book places now

Negotiating Leveraged Loans in Mid-Cap and Large (Cov-Lite) Deals - USA

Gain extensive knowledge on how to approach the credit agreement, cove-lit vs mid-market, voting thresholds, transferability, events of default, negotiating covenants and more

Advanced Business Valuations (USA) Online Training Course

A one-day course

  • The trainer is a Senior Consultant to Grant Thornton in Debt Advisory so has actively involved in the market and has visibility into current trends in the private credit / unitranche market
  • The trainer has had exposure to the North American market over many years through corporate finance, and through servicing a large number of US law firms in London on a bespoke basis (e.g. Simpson Thacher, Millbank Tweed, Baker & McKenzie, Shearman & Sterling, Sullivan & Cromwell)
  • Through his training/consultancy practice he has exposure to a wide range of lenders (e.g. Wells Fargo, RBS, Bank of America)
  • The trainer’s varied career includes stints in commercial and investment banking, accountancy, tax, and law providing insight from a wide range of perspectives. In this time he has sat on various credit committees reviewing large and mid-cap credits
  • The trainer has over 20 years’ experience in debt products from senior through to junior debt; this has given him insight into the legal, structuring, and practical challenges that arise in using junior debt across differing jurisdictions, especially the inter-creditor issues

  • How to approach the Credit Agreement - the programme provides participants with a template on how to approach the credit agreement to focus on the key commercial issues as well as the use and application of the various facilities in the credit agreement
  • Cov-lite vs mid-market - whilst loan markets have adopted many of the features which have been derived from the bond markets (e.g. cov-lite, debt incurrence, and grower baskets) there remain key differences in terms and conditions between mid-market and big-ticket syndicated (Cov-lite) loans particularly so far as the negative covenants are concerned e.g. debt incurrence and the financial covenants (EBITDA add-backs). The programme highlights these disparities
  • The Group - the credit agreement affects different entities in the group in different ways. The programme provides an in-depth understanding of how each entity is impacted from the perspective of both borrowers and lenders
  • Voting thresholds - these are critical in multi-lender deals (i.e. syndicated and clubs) since they are relevant especially when the borrower is in distress (i.e. ability to accelerate and enforce or grant amendments and waives)
  • Transferability - this is critical to lenders when the borrower is distressed as it provides an exit albeit at a discount. For borrowers, the composition of their syndicate can have a significant and adverse impact on their ability to turn the business around and may, in extremis, see them loose complete control
  • Deal economics - the programme review these issues providing insight into current trends & pricing and the cash sweep provisions
  • Events of Default - the EoDs dovetail with the Representations whilst the EoDs are a key inflexion point in the deal hence the grace periods and notification requirements are hotly negotiated (e.g. what constitutes ‘knowledge’ on the part of the borrower?). MAC/MAE clauses are another contentious area of negotiation
  • Negative Covenants - these cover many of the most important commercial aspects for both parties and thus represent the main focus of the negotiation. Debt incurrence (& the ability to secure incremental debt) is often the key issue for PE and active corporates since expansion will invariably entail secured debt issues. Another key area relates to the financial covenants which tend to be more borrower-friendly in Cov-lite deals (especially in relation to the calculation of EBITDA)

Section 1: Key Concepts Defined Terms 

Key Concepts

  • Structure and layout of US Credit Agreement
  • Review of the various types of cov-lite and cov-loose loans and how they are documented
  • The Restricted Group
  • How to read/approach a New York-style credit agreement
  • The three key issues to focus on understanding the deal/debt structure
  • The Wiring Diagram
  • Source and use of funds
  • Capitalisation table
  • The Lender’s Perspective
  • The Borrower’s aims

Review wiring diagram 

 The Restricted Group

  • The Restricted Group
    • Obligors/loan parties – borrowers and guarantors
    • Material subsidiaries vs Non-material subsidiaries
    • Immaterial (Excluded) subsidiaries
    • Non-guarantor restricted subsidiaries (NGRS)
    • Unrestricted subsidiaries
    • Re-designation of subsidiaries to and from the Restricted Group
  • Material subsidiaries
  • What constitutes a material subsidiary – market approach to the threshold %
  • The various tests: EBITDA and other approaches
  • Relevance and application in the SFA
  • Date and manner of determination- Certificate
  • Defaulting Lenders
  • Defined
  • Consequences for defaulting lenders
  • ‘Windstream’ anti-net short provisions
  • Who is a net short lender
  • Dealing with unrestricted lenders and affiliates
  • What are the consequences 

Voting thresholds (& why they matter)

  • Majority lenders - application
  • Required lenders
  • Super-majority lenders - application
  • Unanimous vs Affected lender consent
  • Defaulting lenders
  • Vote splitting
  • Snooze you lose 

Assignments and Participations

  • Assignments and Participations compared
  • Restrictions on transfer
    • Minimum transfer amounts/hold amounts
    • Permitted transferees (i.e. banks etc)
  • Contractual restrictions on Assignment
    • Consent vs consultation
    • White and Blacklists 

Section 2: The Commitments - amounts and terms, fees and prepayments

Types of Facilities (overview)

  • Revolving Credit Facilities ("RCFs") versus Term Loans
  • A and B Tranches
  • Swingline Loans
  • Incremental and Accordion Facilities 

Interest and Fees & yield protection

  • Computation of interest
  • Pricing Grid / Margin ratchets Restricted Group Whats market
  • Yield protection
    • Floors
    • OID
    • Increased costs
    • Market disruption 


  • Optional Prepayment
  • Mandatory prepayments (Cash sweeps)
    • Asset Sales and Recovery Events
    • Excess Cash Flow
    • Allocation of Cash Sweep amounts
  • Pro-rata treatment (repayment) of loans 

Section 3: Representations & Warranties & Conditions Precedent & Events of Default

Representations & Warranties

  • Basis of Reps & Warranties (best of knowledge or absolute)
  • When should Reps be made > Closing or pre Drawdown?
  • Key Reps & Warranties & carveouts
    • Financial Condition
    • No Change (MAE) > scope (prospects?)
    • No Litigation
    • Regulatory & legal matters (ERISA)
    • Accuracy of Information (Rule 10b-5)
    • Security Documentation
    • Patriot Act / OFAC / FCPA 

 Conditions Precedent

  • Initial CPs
  • Repeating CPs (Summary of key)
    • Why they matter
    • Accuracy of information and no MAC
    • No Default 

Events of Default

  • Payment breach
  • Cross-default / Cross-Acceleration
    • Meaning
  • Insolvency
  • Change of Control or Management
  • Grace periods
  • Notice vs knowledge (whose knowledge?)
  • MAC
    • Lender issues
    • Borrower issues (prospects!)
    • Does it really help the lender?

Review IBP v Tyson

Akorn, Inc. v. Fresenius [Del] has this changed matters 

Section 4: Affirmative Covenants

Affirmative Covenants 

  • The rationale for Affirmative covenants
  • Application of Affirmative covenants
  • Maintenance / Existence, Property, Insurance
  • Environmental
  • Collateral
  • Financial Information
    • Coverage
      • Scope of information
      • Frequency
    • Compliance Certificates > requirements
    • Information at Lender’s request
    • Notices re Material Events
      • Default
      • Litigation
      • Ownership
    • Information re Collateral
    • Books / Records > Inspection Rights
    • Designation of Subsidiaries 

Section 5: Negative Covenants

Financial Condition Covenants

  • Purpose of financial covenants
  • Types of financial covenants > use and application
    • Leverage ratio
    • Interest cover ratio
    • Fixed Charge Coverage ratio
    • Net Worth
    • Capital Expenditure limits
  • Springing leverage ratios
  • Key definitions
    • EBITDA
    • Leverage (Debt)
  • Dealing with shorter periods than 12 months
  • Equity Cures > key issues
    • How many over life of loan consecutive)
    • Nature of “equity” injection
    • Source of capital
    • Application of cure proceeds
    • Timing
    • Overcures / Caps 

What about Baskets

  • Rationale and trends
  • Ratio governed baskets
    • Senior secured vs Total debt
  • Grower baskets
    • Use and application
    • Variables used in grower baskets (EBITDA, CNI, Assets)
  • Builder baskets
    • Use and application
  • Reclassification between baskets
  • Timing - when can baskets be used 

Incremental debt & Accordions

  • Conditions for accessing incremental debt
  • ‘Typical’ terms of Incremental debt
    • Ranking
    • Tenor / maturity
    • Margins /yields
    • Sharing prepayments
    • Cap type – Hard/fixed vs leveraged based
  • Types (and style) of debt baskets
    • Credit Facility
    • General debt
    • Free and clear baskets
    • Receivables
    • Securitisation
    • Purchase Money debt
    • Acquired Debt
    • Acquisition debt
    • Contribution debt
    • Intercompany debt
    • Available RP Capacity basket
  • “Sidecar” facilities/debt
  • Interaction of free & clear basket with Ratio debt basket
  • MFN & Sunset issues
    • Scope of MFN
  • Restricted payments baskets
  • Available Amount / Starter baskets
    • Incidence
    • Size > percentage of EBITDA vs other
  • Restricted payments’ leverage levels > dividends
  • Reclassification between baskets > yes or no
  • Points of negotiation 

Liens, Collateral & Guarantees (Negative Pledge)

  • Fraudulent Conveyance
  • Permitted Lien baskets
  • How and where can incremental debt be secured
    • Permitted Liens vs Permitted Collateral Liens
    • Ranking of security (Senior, junior, priming)
  • Potential areas of leakage
    • Unrestricted subsidiaries
    • NGRS
  • Synchronising permitted collateral with Debt incurrence 

Asset Dispositions

  • Scope of covenant
    • Meaning of dispose
    • Permitted dispositions
  • The Proceeds (waterfall)
  • Other ordinary course of business exceptions
    • Obsolete/worn-out out assets
    • Ordinary course of business assets (e.g. inventory)
    • Sale by insolvent NGRS to another NGRS 

 Restricted payments

  • Scope of covenant
    • Dividends
    • Share repurchases
    • Junior debt
    • Restricted (risky) investments
  • The General RP basket
    • Formulation (cumulative CNI, fixed annual)
    • Strater amount
    • Other items that can expand the basket (equity, excess cash)
  • Other restricted payment baskets
    • Taxes, Admin expenses
  • “Typical” Conditions
  • What defaults could block access to baskets
  • Interplay with Excess Cashflow 

Other Negative Covenants (summary)

  • Transactions with Affiliates
  • Sale & leaseback
  • Lines of business
  • Restricted Investments 

Financial maintenance covenants

  • The key financial covenants
    • Leverage ratio > 1st Lien, Secured debt vs total debt
    • Fixed-charge coverage ratio
    • Interest cover ratio
    • Minimum EBITDA
    • CapEx
  • Incidence in different deals sizes
  • Step downs
  • Cushion (Headroom) > variation for different deals sizes
  • EBITDA add-backs / addbacks
    • Recurring expenses (caps vs uncapped)
    • Synergy add-back caps (run-rate)
  • Equity cures
    • Key issues for borrowers
    • Traps for lenders

The trainer is a consultant, public speaker and author with expertise in private equity, debt advisory, restructuring and infrastructure. He is a Senior Advisor to KPMG Finland, a Senior Advisor to Reorg EMEA Covenants, the leading provider of information to the European High Yield community, and a Senior Consultant to Grant Thornton UK.

Training programmes are provided to a wide range of blue-chip clients in Europe, Africa, the Middle and Far East, North America and Australasia. In-house clients include banks (BNP Paribas, Société Générale, ING, Barclays Capital, Bank of China, RBS, SEB); lawyers (Baker & McKenzie, Skadden Arps, Sullivan & Cromwell, Cadwalader, Latham & Watkins, Weil, White & Case); advisory firms (Lazard, PWC, M&A International, KPMG, EY, Deloitte); PE firms (Cinven, Advent, Barings Asia, Waterland); corporates (Siemens, Airbus, Turkcell, Candy Crush, Gunvor, Statkraft) and governmental bodies (the UKLA, the EBRD, the ECGD, Omani Oil Corp.)

He qualified in South Africa both as a Chartered Accountant, with Deloitte, and as a lawyer with Hofmeyr where he was involved in structuring a number of high-profile project financings including BMW 3 Series, Ford Sierra, GM, Sappi and Mondi.

When he moved to London and joined Lazard Brothers as a corporate finance executive he was involved in a wide range of public and private transactions. Subsequently he joined Hoare Govett as an assistant director where he acted as an advisor to smaller listed companies and was involved in several syndicated Euro-Equity Initial Public Offerings.

In 1991 he joined ABN Amro’s cross border M&A team prior to being transferred to MeesPierson Corporate Finance as a Director in Cross-Border M&A where he was also involved in a number of deals in Central Europe. During this time he was a member of the EU-PHARE programme and advised the Estonian government on their privatisation programme.

He is the Programme Director at the City Business School, London, for Infrastructure Finance for the M. Sc. programme in Business Administration and Finance.

He is a member of the Institute of Chartered Accountants in England & Wales and the South African Institute of Chartered Accountants. He completed a BA and an LLB at the University of Natal and a B. Compt. (Hons) at UNISA.

Despite the headwinds that have blustered the past year, the leveraged loan market has proved remarkably resilient and, as at the end of October, issuance was down only 13% vs the corresponding prior period. In addition, the anticipation of the wide availability of an effective vaccine has perhaps prompted signs that there is light at the end of the tunnel.  First, in October, institutional loan volumes surged to c $55 billion, the highest level seen since the onset of Covid. Secondly, CLO issuance soared to year-high record for the second month in succession. Finally, refinancings seem to be back on the agenda, another sign that investors are willing to accept more risk.  Together these trends indicate that the fixed income markets remain an attractive asset class for investors and borrowers. Surprisingly, the primary market spreads for institutional first-lien loans in large corporates contracted sharply from around 575bp in July to c 400bnp (over libor) by November.

In the mid-market volumes remain 40 percent lower than volumes in 2019. Unsurprisingly, primary market spreads for mid-market institutional first-lien loans have drifted north over the last year but remain below the recent peak seen in 2Q2016.

The programme is aimed at borrowers, lenders, and professionals involved in the leverage loan market.  It is designed to provide participants with insight into the key issues in the leveraged loans market (large and mid-caps, PE and corporates) and provides practical guidance on the key negotiation issues in arranging these loans from the perspective of both borrower and lender. In addition, the programme highlights the key areas of value leakage and risk for lenders in the loan documentation.


Have this course presented In-House

  • On a date, time and in a location of your choice
  • Topics expanded or deleted to your bespoke requirements

Have this course pre-recorded

  • Full course recording edited exclusively for your company
  • Files converted to enable housing on your LMS

We use cookies

In order to show you courses tailored to your profession we use cookies.

To enjoy all the features of this website please accept.