Sponsors push for flexibility as Portability reappears
Q1 2017 Loan Market Update shows Portability features return with levels set to test high water mark of 2014
Debt Explained, the leverage finance data and analysis company, has released its Q1 2017 Loan Market Update showing that Sponsors are taking advantage of favourable loan market conditions to build in the flexibility to “port” the financing following a Change of Control in current loan deals.
Last at their peak in 2014, but largely absent from the market last year, the first quarter of 2017 has seen approximately 10% of all senior syndicated leverage loans reviewed by Debt Explained in the European market contain a form of portability; with this figure increasing to approximately 14% if including term sheets reviewed in the same period.
Other findings include:
- Covenant-loose (leverage maintenance covenant only) was the dominant covenant package in Q1 2017 with 54% deals falling into this category
- Incremental debt increasingly linked to ratio and grower caps. However adjustments to the free and clear basket have been particularly aggressive and provide Borrowers with significant flexibility
- Increasing variation between time limitations for realising cost savings and synergies deals. Although 12 months is still the most popular there are a handful of deals which have successfully negotiated an unlimited period – more commonly seen in the bond market
Stephen Mostyn-Williams, Chairman of Debt Explained, explained that the report shows how Borrowers – and Sponsors in particular – are using the benevolent market conditions to build in flexibility for the future.
“The market is still moving in one way only- borrowers continue to extact better terms from lenders. While there are numerous factors behind this it means lenders should be fully aware of terms (some of which may return to haunt them in future).”
For further information on Debt Explained please contact Sophie Belcher on +44 (0) 20 7100 9777 or email@example.com