Incremental facilities meaning

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 incumbent senior term lines. An exception is seen in certain unitranche super-senior mid-cap structures, which also permit additional super-senior term debt. In large-cap...

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...

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...