Leveraged Loans in Private Equity and Corporate Transactions

Transcription

1 Leveraged Loans in Private Equity and Corporate Transactions Negotiating the key commercial and legal terms in club and syndicated facility agreements This course is presented in London on: 06 March 2018, 04 October 2018 This course can also be presented in-house for your company or via live on-line webinar The Banking and Corporate Finance Training Specialist

2 Course Objectives Participants will: Get an overview of the market trends affecting corporates and PE borrowers Gain an appreciation of the important aspects of debt service Learn about mandatory prepayments (cash sweeps & disposal proceeds) Be appraised of the key negotiating strategies from the borrower s viewpoint Get to grips with specific issues for revolving credit facilities Be taught Course about Overview the importance of covenants and undertakings Master the issues financial covenants and equity cures Gain a strong appreciation of baskets in the loan market, their use and relevance Background of the Trainer The trainer is a consultant, public speaker and author. He provides training programmes globally to a blue-chip client base on private equity, debt finance, loan documentation and restructuring. He is a senior consultant with Debt Xplained, with Grant Thornton UK (Debt Advisory) and is also a Senior Advisor to KPMG Finland. He has spoken at conferences in the UK, Europe, Australasia & South Africa. He provides training to a wide range of clients on a bespoke in-house basis & publicly through Redcliffe Training Associates. Additionally, he is the Programme Director for the infrastructure/project finance module for the MBA programme at the Cass Business School in London. Course Content Overview of the market trends affecting corporates and PE borrowers Bifurcation of the leverage loan market Trends larger syndicated deals Trends in club loans Influence of high yield bond market trends Impact of New York style documentation Corporates vs PE what s the difference Key negotiating strategies the Borrower s view Criteria for selecting the most appropriate lender - Banks vs Direct lenders Key differences in approach between banks and direct lenders Pros and cons of Banks vs Direct lenders Some banks (and branches) are different Can direct lending applicable for corporate borrowers? Strategies for negotiating the key commercial terms How to approach the term sheet Hard or soft terms? Focus on everything or only a few critical issues Do debt advisors offer value for money - Getting the best from your advisors What about the fees A Checklist for borrowers The Lender s perspective Beware Commitment letters reflections post Novus Aviation The role of the information covenants do they really matter

3 If financial covenants don't matter, what does? What to focus on in the collateral package Problems with non-guarantor restricted subsidiaries Scope of the Loan Concept and composition of the Covenant (Restricted) Group Matters affecting Material subsidiaries Matters affecting Immaterial subsidiaries Dormant subsidiaries why they matter Issues re Joint Ventures & Equity Changes to the Lenders Transferring a loan methods, pros and cons Novation Assignment legal and equitable Sub-participation Ability to transfer - Consent vs Consultation Trends in the leveraged market Why transferability is important for lenders Potential problems for borrowers Restrictions on Transferability White / approved lists vs disqualified lenders Voting thresholds Key voting thresholds & why they matter Different problems for PE and corporate lenders Different approaches in syndicated vs club loans Majority lenders Unanimous consent Super-Majority lenders typical scope & thresholds Potential pitfalls for lenders Impact of Yank the Bank Role of Snooze & Lose Treatment of Hedge counter-parties A word about baskets how and why they matter Role and application of baskets in the loan market Types of baskets, structure use and application Grower baskets Builder baskets Scalable baskets Reclassification and splitting between baskets Permitted definitions how & why they matter Role and relevance of the Permitted definitions Synchronising the Permitted baskets Permitted Acquisitions Typical carve-outs- hard vs soft baskets Additional restrictions Permitted Financial Indebtedness / Security / Guarantees Scope Financial Indebtedness defined (typical exclusions) Incremental debt- scope and coverage Accordion facilities Typical terms & conditions

4 Pricing - MFN & sunset periods what s market General & other debt-related baskets Permitted Payments - typical carve-outs What payments are permitted Basket carve outs amounts, caps, carry forward/back Subordinated debt, equity & equity substitutes Management/monitoring fees Permitted Disposals Scope & typical conditions Debt Service Differences between banks and direct lenders to amortisation Interest and default interest periods Libor/Euribor floors Original issue discount (OID) use in the deal, market trends Margin and margin ratchets Increased costs & gross up clauses Specific issues for Revolving Credit Facilities ( RCFs ) Clean-downs re RCFs Cashless rollovers why they matter Problems with Headroom Mandatory prepayments (Cash sweeps) Excess Cashflow defined Excess Cashflow typical deductions De minimis basket Cash sweep step downs (PE vs Corporate) Use and Application of Retained Excess Cash flow Mandatory prepayments (Disposal proceeds) What is a Disposal Baskets to sale proceeds Annual individual deal amount Annual basket carve-out Excluded Disposal proceeds / Reinvested amounts Other mandatory prepayments - overview Acquisition Proceeds - overview What are Acquisition Proceeds Excluded Acquisition proceeds Insurance Proceeds Excluded Insurance Proceeds Basket annual or per deal Retention periods Listing Proceeds & change of control Covenants & Undertakings generally Covenants generally three categories Information covenants Why and how they matters Issues for lenders issues for borrowers LMA v Market approach General undertakings

5 Guarantor coverage scope and issues for borrowers Core carve-outs for sponsors Carve-outs for corporate borrowers Financial covenants and Equity cures The main covenants per the LMA & market Cash flow cover Leverage Interest cover Capex limits EBITDA limits (not LMA) Springing covenants use, application and triggers Other matters starting headroom Market trends Number of covenants Headroom Equity cures What do they apply to EBITDA, leverage, cash flow? Terms - How many, consecutive, over-cures, application of the funds Cures in practice Covenant Suspension/ Loosening Use and application Typical triggers Scope of covenants affected Default and Events of Default Default vs Event of Default What are the key EoDs Grace periods Borrower-friendly exclusions What about cross-default MAC / MAE clause Do they still matter posy recent cases? Different formulations LMA vs market (what is reasonable) Problems with Sanctions clauses How to mitigate conflict between U.S. and EU regulations Course Summary This programme focuses on club and syndicated leveraged loans provided to both corporate and PE borrowers (i.e. typically this covers loans > 2.0x Debt/EBITDA for most sectors). Loan markets have experienced significant changes over the last few years on a number of fronts; first, larger, syndicated and club deals have seen the importation of terms from the bond markets (e.g. grower baskets and cov-lite, cov-loose packages). Many of these larger deals have also imported N.Y. style language, which is more familiar to U.S. borrowers and lenders. At the same time direct/alternative lending had made significant inroads into the lending market bringing with them a more eclectic approach to lending (e.g. a preference for bullet, as opposed to amortising facilities). Whilst there are subtle differences between the objectives of corporate and PE borrowers, both share a common objective of seeking to obtain the optimum terms, pricing and flexibility which will allow them to execute their strategic objectives. Clearly the larger deals, where

6 borrowers have the option of accessing the high yield bond market, offer borrowers greater flexibility however smaller facilities have also benefitted from stiff competition from direct lenders (which reaches well below that threshold - in some cases 15 million) which has forced banks and other lenders to offer borrowers better terms and pricing (e.g. grower baskets have been seen in facilities below 30 million). The topics aim to provide participants with an understanding of the trends and key issues affecting loan facilities in both club deals syndicated deals and also provides borrowers and lenders with a template of how to approach the negotiations. The programme is aimed at borrowers and lenders as well as lawyers, accountants, debt and corporate advisory and other professionals involved in these transactions. Whilst there are subtle differences between objectives of corporate borrowers on the one hand and PE borrowers on the other; there is a high degree of overlap across. 09:00-17:00 London Standard Price: VAT Membership Price: VAT In-House Training Delivering this course in-house for a number of participants could be very cost effective. The venue and timing can be agreed to suit the client, as well as the selection of the trainer and the precise contents of the seminar. Tailored Learning All of our training courses can be tailored to suit your company s exact training needs. We will work closely with you to help develop a training programme with content that is unique for your organisation. Please us on enquiries@redcliffetraining.co.uk for more information E-Learning This course can also be presented as a bespoke e-learning programme created by you to fit your exact requirements.