Q&As

Development of the Loan Market Association ( LMA) documentation The initiative to create the LMA’s investment grade suite started in 1998, driven by market calls for a uniform syndicated facility agreement. The project emerged in response to market demand for a standardised syndicated facility agreement. Development of the LMA’s leveraged materials followed a comparable path: an initial facility agreement for leveraged acquisition finance transactions was released in 2004, with the recommended Intercreditor Agreement for leveraged acquisition finance (senior and mezzanine) issued in 2009. Since then, the LMA has continued to issue further precedents to reflect demand and changes in the market. There are now standard forms available for deals involving senior secured notes. In addition, there are forms for structures that feature both senior secured notes and high yield notes, recognising the significant volume of transactions financed in part or in full through high yield debt. The...

What are incremental facilities? An incremental facility is a provision in a credit agreement that, once certain pre-agreed conditions are met, gives a borrower the latitude to take on further, or enlarged, debt commitments. Those additional commitments will usually and ordinarily enjoy guarantees and security on the same footing as the existing facilities. Such arrangements are commonly nicknamed “accordion” facilities because the overall commitments under the credit agreement expand when incremental debt is raised. Typical deal structure—where/when are they used Flexibility for incremental debt is a familiar element of sponsor-backed transactions in both the large-cap and mid-cap space. The Loan Market Association’s leveraged finance form of loan agreement (the LMA Credit Document) now provides optional drafting to include this feature within the form. In mid-cap deals, the expectation is generally confined to pari passu ranking senior term incremental facilities, which also sit alongside the...

This Practice Note looks at Term Loan B ( TLB) facilities, which often feature as a senior tranche within syndicated loans in leveraged financings. TLBs are long-established in the US market and are increasingly seen in the European lending market for institutional investors. It examines the structure of a typical TLB and how it diverges from traditional European leveraged loans, before setting out the key features. This Practice Note assumes some understanding of leveraged finance. For introductory information, see: Introductory guide to acquisition finance. For explanations of common terms, see Practice Note: Glossary of acquisition finance terms and jargon. What is a Term Loan B? In lending markets, ‘ Term Loan B’ or ‘ TLB’ (short for Term Loan Bullet) describes a tranche of senior secured credit facilities made available to a borrower and intended to be syndicated in the...

This Practice Note: provides a synopsis of the three principal forms of fund finance: capital call facilities (often referred to as equity bridge facilities) net asset value ( NAV) (or asset backed) facilities hybrid facilities examines green and sustainability-linked finance, together with some types of fund-related finance, GP/ Manager facilities and co-invest facilities sets out key security and documentary considerations, including financial covenants, representations, undertakings, events of default and prepayment events The capital call facility market is well-established and largely standardised, though approaches to assessing investor creditworthiness and differences driven by varied fund structures can diverge. By contrast, NAV facilities and hybrid facilities are highly flexible, taking multiple forms with differing security packages and covenant...

Acquisition finance transactions In an acquisition finance transaction, beyond the debt—whether constituted by loans or bonds—needed to finance the deal, the borrower group will commonly require additional banking facilities. These might include, for example, an overdraft, a stand-by letter of credit facility or a foreign exchange facility, and can frequently all be delivered under the umbrella of a revolving credit facility ( RCF) in the senior facilities agreement ( SFA). The RCF will usually be capable of being drawn in three distinct ways: in cash (by way of revolving loans) as syndicated, non-cash facilities, eg letters of credit—these will be identified in the documentation; and in the form of bilateral lines known as ancillary facilities Unlike a revolving credit facility drawn in cash, ancillary facilities are not typically of a kind that lends itself to division amongst several lenders, so the...

What does this Practice Note cover? This Practice Note introduces high yield bonds. It addresses: the types of investors in these securities, such as institutional investors and funds the motivations for investing, including benefits versus loans (for example, the potential for higher returns) the issuers of these instruments, typically corporates with sub-investment grade credit ratings an outline of the high yield bond market, covering its size, principal participants and usual features What are high yield bonds? Bonds are capital markets instruments that constitute a form of debt security. For more on capital markets and bond issues, see Practice Note: Key features of the debt capital markets. High yield bonds—also known as junk bonds or speculative grade bonds—generally provide investors with higher rates of return than other corporate bonds because they are considered riskier investments. High yield bonds are typically rated below...

This Practice Note This Practice Note serves as a primer on the facilities commonly included in a leveraged senior facilities agreement ( SFA) and considers: the key attributes of each category of senior facility the types of senior lenders typically involved how the terms of the senior facilities are documented the security package and intercreditor position for senior facilities For an introductory overview of acquisition and leveraged finance, see Practice Note: Introductory guide to acquisition finance. For fuller detail on standard terms for senior facilities, see Practice Note: Introductory guide to leveraged finance facilities agreements. Definitions for many of the expressions used in this Practice Note are set out in the Glossary of acquisition finance terms and jargon......

Mandatory prepayment events Facility agreements very frequently oblige borrowers to repay, in whole or in part, the facility when specified particular triggers arise, commonly referred to as mandatory prepayment events. For an overview of the typical mandatory prepayment events, see Practice Note: Repayment, prepayment and cancellation. Historically, leveraged facilities agreements have set out a broader catalogue of mandatory prepayment events in comparison with an investment grade loan agreement......

This Practice Note provides a starter overview of acquisition finance for readers with little or no prior exposure. It sets out: what acquisition finance means the parties involved and the documents used in an acquisition finance deal typical structures for acquisition finance transactions the main phases of an acquisition finance transaction the key legal topics to consider recent developments of particular relevance to the leveraged finance market It also directs you to related resources within Lexis+. Understanding key terminology Acquisition finance involves extensive jargon and shorthand. For explanations of common expressions, see Practice Note: Glossary of acquisition finance terms and jargon. You may find it useful to read this Practice Note alongside the glossary. What is meant by the term acquisition finance? Acquisition finance transaction The phrase ‘acquisition finance transaction’ generally describes the purchase of a business that is largely funded by debt...

This Practice Note discusses: the aim and customary representations found in a leveraged senior facilities agreement ( SFA), and how they vary from those in an investment‑grade facility agreement typical sponsor approaches to narrowing the scope of those representations the usual timing for delivering representations the function of, and standard information undertakings in, a leveraged SFA the role of, and common general undertakings within, a leveraged SFA how ‘baskets’ are used to moderate the effect of the general undertakings the rationale for, and usual events of default The material here proceeds on the basis of an SFA broadly aligned with the senior multicurrency term and revolving facilities agreement for leveraged acquisition finance transactions available to members on the LMA website ( LMA Leveraged SFA). For details on other components of a leveraged finance facilities...

This Practice Note offers a primer on the standard provisions you would expect in a straightforward facilities agreement used in leveraged acquisition finance. It outlines the likely funding sources for leveraged acquisitions, then highlights the principal respects in which a typical leveraged facilities agreement departs from a standard investment‑grade facilities agreement. It then walks through each section of a conventional senior leveraged finance facilities agreement. For an introductory guide to acquisition finance, see Practice Note: Introductory guide to acquisition finance, and for a glossary of commonly used terms and jargon, see the Glossary of acquisition finance terms and jargon. Sources of finance for leveraged acquisitions—impact on documentation Senior facilities represent just one of several potential funding routes for leveraged acquisitions; this section briefly surveys the available options. Acquisition finance transactions are typically structured with a blend of debt and equity. The debt element may...

What is a 'market flex' provision? A market flex clause grants arrangers and underwriters limited leeway to adjust financing terms after the relevant facility agreement has been signed. As they arrange and underwrite the transaction, these provisions help them distribute the debt to the market and cut their exposure to the borrower to an agreed minimum hold level. Typical wording allows the arrangers or underwriters to alter certain key aspects of the financing to make it more appealing to potential lenders, particularly in more difficult or volatile market conditions. It is usually addressed in the mandate letter or the arrangement/underwriting fee letter. For more information on mandate letters, see Practice Note: Mandate letters. For more on the role of arrangers and underwriters in loan transactions, see Practice Note: The finance parties. When can market flex be used? These provisions can be used by the...

This Practice Note sets out guidance on payment-in-kind ( PIK) facilities. It covers: the principal features of PIK facilities, including a standard transaction structure key terminology the risk profile and yield associated with PIK facilities why PIK facilities may be appealing to the sponsor, and core documentary protections for PIK finance parties Key features of a PIK facility What is a PIK facility? A ‘ PIK’ loan facility typically refers to debt where interest is capitalised throughout the term. In Europe, this debt is most often seen in the financial sponsor-backed leveraged finance market, provided to a sponsor’s portfolio business. PIK facilities—transaction structure The PIK loan is commonly advanced to a PIK Holdco within the sponsor’s portfolio group. PIK Holdco is usually the immediate holding company of the Parent. The Parent sits at the top of the part of the group that...

Financial covenants feature across many types of banking deal to monitor and assess the financial performance of the borrower company or group. This Practice Note outlines the role of financial covenants within leveraged finance. It covers: the meaning of financial covenants how financial covenants operate in leveraged finance transactions the covenant package typically used on a classic leveraged finance transaction the methods for testing financial covenants other applications of financial ratios, and equity cure, mulligan and deemed cure provisions See the Glossary of acquisition finance terms and jargon for definitions of certain expressions used in this Practice Note. What are financial covenants? Undertakings (also called ‘covenants’) are promises from the borrower (and sometimes other members of the borrower’s group) to the lender about carrying out, or refraining from, particular actions. Financial covenants are a distinct category of covenant or undertaking. They are commitments to achieve or maintain specified financial...

[ To be printed on the headed paper of the lender’s lawyers ] To: [ insert name and address of Lender ] [ insert date ] Dear [ insert name of Lender ] [ Matter name/reference ] We have served as English law counsel to [ insert name of lender ] (the Lender) in relation to the provision of finance to [ insert name of borrower, company number and registered office ] (the Borrower) comprising a [ term loan and revolving credit facility ] [ describe facilities ] of £[ insert amount ] (the Transaction), and to the negotiation, drafting, execution and completion of the documents specified in Schedule 1 ( Documents examined), Paragraph 1 ( Opinion Document) (the Opinion Document). We deliver this opinion letter to you, the Lender, pursuant to [ Schedule 2 ] ( Conditions Precedent) of the facility agreement between the Lender and the...

This How to Guide explains: the time period allowed for registering charges at Companies House the consequences of failing to register a charge at Companies House how to apply for an extension of time, and what the courts will consider when deciding whether or not to allow the extension For detailed information on the registration of security at Companies House, please see the following Practice Notes: Registering security at Companies House How to register security at Companies House Problems with registering security at Companies House—what to do next What is the time period for registering charges at Companies House? All charges created by a UK company or LLP must be registered at Companies House, subject to certain limited exceptions. The ‘period allowed for delivery’ of a registrable charge, together with the accompanying statement of...

This Practice Note sets out a clear overview of how UK and EU legal frameworks are developing to accommodate digital bonds. It explains key terminology and the digital bond transaction lifecycle, covering the principal documents needed for issuance, with emphasis on smart contracts. It also signposts what practitioners should consider when engaging in digital bond transactions. Summary Digital bonds are now legally recognised in the UK and EU, provided the issuance structure complies with the relevant securities regime, the Prospectus Regulation and/or Regulation ( EU) 2023/1114 on markets in crypto-assets ( Mi CA), and the underpinning distributed ledger technology ( DLT) infrastructure falls within the scope of the competent regulator or sandbox. Practitioners should determine early whether an instrument is a native digital bond or a tokenised form of a traditional bond, as that choice shapes property law status, custody and settlement exposure, and...

[ Headed notepaper of law firm issuing the opinion ] [ insert name and address of Lender ] [ insert date ] Dear [ insert name of Lender ] Facility Agreement dated [ insert date ] made between [ insert name of lender ] (the Lender) and [ insert name of borrower ] (the Borrower) (the Facility Agreement) We refer to clause [ insert number of clause which requires delivery of legal opinion ] of the Facility Agreement, which requires the delivery of a legal opinion. This opinion is provided in satisfaction of that requirement. Unless expressly defined in this opinion, terms defined in the Facility Agreement carry the same meanings when used herein. This opinion is governed by English law and is subject to the exclusive jurisdiction of the courts of England. 1 Background 1.1 This opinion concerns the English law aspects of a transaction (the...

When evaluating a general damages claim, the practitioner ought initially to refer to the Judicial College Guidelines (JCG)...

This Practice Note This Practice Note reviews mechanisms used in settling litigation. A Tomlin order consists of a consent order paired with a schedule. It operates to stay proceedings on terms that have been agreed. The provisions contained in the schedule may remain confidential. This Practice Note describes the scope of confidentiality attaching to the schedule and sets out how it differs from a standard consent order. Sample wording for a Tomlin order is included, alongside links to precedents, as well as guidance on court approval. It also addresses varying, setting aside and enforcing a Tomlin order, including the considerations the court will take into account when handling applications for each. Further guidance is provided on interpreting and applying the relevant provisions of the CPR; however, some courts and divisions impose very specific requirements for both drafting and approval, and for approaching the schedule and confidentiality issues. Accordingly, you must consider the particular rules and court guide provisions in the forum where your claim is proceeding when drawing up the Tomlin order...

Date [ date ] Parties [ name of Landlord ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Landlord) [ name of Tenant ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Tenant) [ [ name of Guarantor ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Guarantor) ] [ [ name of Mortgagee ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Mortgagee) ] Definitions Within this Deed, the terms below shall be interpreted as follows: [ Annual Rent • the annual sum reserved under the Lease; ] [ Insurance Rent • the Tenant’s share of the Landlord’s costs of insuring the Property (as set out in the Lease); ] Lease • the lease of the Property dated [ date ], entered into between (1) [ the Landlord OR [ name ...

I, [ name ], of [ address ], solemnly and sincerely state that: [ Matters to be verified, set out in numbered paragraphs ] I make this solemn statement in good conscience, believing it to be true, and pursuant to the provisions of the Statutory Declarations Act 1835. DECLARED at [ details ] this [ day ] day of [ month and year ] Before me ................................................................................ [ signature of the person before whom the declaration is made ] A [ commissioner for oaths OR [ solicitor OR [ insert other qualification ] ] authorised to administer oaths ]...