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CASE STUDY
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Debt pushdown meaning
Published by a LexisNexis Banking & Finance expert
What does Debt pushdown mean?
A debt pushdown is the post-acquisition transfer of borrowing from a holding company to a trading subsidiary, so the subsidiary becomes the primary borrower. In practice, the holding company repays its debt and the subsidiary re-borrows the equivalent amount, commonly by novation or assumption of the external facilities, or via an intra‑group loan with the cashflows largely effected through accounting entries. The proceeds are upstreamed to the holding company to discharge its original borrowing.
This is a market term rather than one defined by legislation or case law. It is widely used in acquisition finance and leveraged buyouts to: (i) align debt service with operating cashflows; (ii) secure interest deductibility at the operating company level (subject to corporate interest restriction/interest limitation, transfer pricing and anti‑hybrid rules); and (iii) permit lenders to take security over operating assets without breaching capital maintenance rules on unlawful distributions.
Across England & Wales, Scotland and Northern Ireland the concept is consistent; financial assistance prohibitions for private companies are largely abolished, but capital maintenance rules still apply. In Ireland (and for UK public companies and their subsidiaries), financial assistance restrictions remain and structures must use compliant procedures. Care is also needed on distributable reserves, security/guarantee capacity and directors’...
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View the related Practice Notes about Debt pushdown
PRACTICE NOTES
Acquisition and Leveraged Finance: Practitioner’s A–Z of Terms, Covenants, Structures and Jargon
This glossary sets out many of the expressions commonly used in the leveraged finance market. Words appearing in the definitions in bold are defined elsewhere in this glossary. For further banking terminology, please refer to the main Banking & Finance Glossary... Acquisition finance glossary—A Acceleration Acceleration is the formal action taken by the agent, on the instructions of the majority lenders, following an event of default, such as making a demand for early repayment of the loan. See Practice Note: Accelerating a loan for more information... Accordion feature/accordion facility An accordion, also called an incremental debt feature, is a mechanism in the facilities agreement that, provided specified conditions are satisfied (for example, pro forma compliance with a leverage test), permits those lenders under the facilities agreement who wish to do so to advance additional debt. The terms for that extra debt are typically captured in an increase notice. This accordion or incremental debt flexibility is different from structural adjustment, which usually requires the majority consent...
21 May
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PRACTICE NOTES
UK Banking, Finance, Capital Markets, Derivatives and Insolvency Law Glossary including Islamic finance
Banking & Finance glossary A Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) The foremost Islamic, international, autonomous, independent, not-for-profit corporate body that develops and issues accounting, auditing, governance, ethics and Shari’ah benchmarks and standards for Islamic Financial Institutions (IFIs) and the wider Islamic finance sector. Founded in Bahrain in 1991, it is backed by a number of institutional members across more than 45 countries, including central banks and regulatory authorities, financial institutions, accounting and auditing practices, and legal firms. Its pronouncements are currently applied by leading Islamic financial institutions across the world and have advanced a progressive and gradual harmonisation of global Islamic finance practice. It also delivers professional qualification programmes—notably Certified Islamic Professional Accountant (CIPA), Certified Shari’ah Adviser and Auditor (CSAA), and the corporate compliance programme—in efforts to strengthen the industry’s human capital and governance frameworks. For further details, see Practice Note: Key participants in the Islamic finance industry—Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Acceleration Acceleration is the formal action...
22 May
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