Negotiating Loan Documents in Private Equity & Corporate Leveraged Deals

Course Content:

Introduction

• Key features of the Loan market
  • Investment grade
  • Leveraged / High yield
• Review of typical leveraged structures
  • Sponsored
  • Sponsor-less
• The Parties and key agreements in the deal
• Key Finance documents
  • Senior Facility Agreement (“SFA””)
  • Security Documents
  • Mandate Letter,
• Role and influence of LMA documentation
• General approach to the Loan agreement
• Practical tips on how to read the SFA and identify the key areas

Scope of the Loan

• General structure and function of the Loan and Schedules
• Dramatis personae – Borrowers, Obligors, Guarantors, Group
  • Definition of “Group” and impact on the deal
  • Issues re Dormant subsidiaries
  • Material and non-material subsidiaries
• Key definitions
  • “Permitted” transactions, M&A, loans etc – and why they matter
• Key voting thresholds & why they matter
  • Majority lenders
  • Super-majorities
• Changes to the parties
  • Methods – assignment vs sub-participation
  • Key issues for Borrowers – Consent vs Consulation
  • Key Issues for Lenders
• Debt buy-backs
  • LMA 2008 amendments
  • Methods
  • Information and voting

Key aspects of Utilization, RCFs & Capex Facilities

• Debt Service
  • Impact of the Capital structure – Lender / Borrower conflicts
  • Interest and default interest periods
  • SWAPS & Hedging
  • Margin and margin ratchets
  • Impact of default / EoD
  • Interaction with Financial covenants
• Yield protection
  • Impact of Basel III
  • UK Bank Levy
  • US issues (Dodd Frank & FATCA
• Specific issues for Revolving Credit Facilities (“RCFs”)
  • Aspects relating to RCFs – clean-downs
  • Problems with Headroom
• Aspects relating to Capex facilities & baskets
  • Carry forward & carry back

Repayment, prepayment & cancellation

• Repayment generally and repayment styles
• Voluntary prepayment or cancellation
• Mandatory repayments (cash sweeps)
  • Surplus cash
  • Disposals
  • Warranty claims and other sources
  • Key issues for Borrowers – baskets, grids
• Permitted payments (to Sponsor) – can it ever be allowed

Representations and Covenants

• Representations – why and when they matter
  • Clean-up periods
• Covenants & Undertakings generally
• Information covenants
  • Issues for Lenders and Borrowers
  • Information rights pre and post default
• General Undertakings
  • Negative pledges
• Financial covenants – general approach
  • The main covenants per the LMA
  • Use and application
  • Pros and cons of the various financial covenants
• Equity cures
  • Why they matter and when they don’t
  • Current market practice
  • Cures in practice
  • Recent case law

Security

• Overview of the LMA Agreed Security Principles
• Core carve-outs sought by Sponsors
• Other exceptions sought by Sponsors
• Key negotiation issues re Guarantor Coverage Test
  • What is covered (Assets, Turnover etc?)
  • Agreed percentage
• Which Companies are included?

Default and Events of Default

• Default vs Event of Default
• Typical events of default
• Key issues re MAC clauses
  • When and why MAC doesn’t matter
  • The key words Borrowers should never allow
  • Other traps for the Borrower
  • Agreeing a sensible compromise / What is or should be acceptable
• Equity cures, Mulligans, yank the bank, snooze n lose

Inter-creditor issues re mezzanine loans

• The key issues relevant to mezzanine lenders (Confidentiality, Information)
• Other key issues
  • Standstills
  • Enforcement
  • Protection vs the Sponsor (Option to Purchase)
• Release of Security in Distress (European Directories)
• Valuation issues (IMO Carwash)

What our clients are saying about the course

“A highly experienced trainer with a hands on approach which added significantly to the course”

“Real life examples from the trainer’s own experience”

“A well-structured course with a good mix between theory & practice”