Yield cap meaning

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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...

Loan market and developments Swiss National Bank figures for September 2024 indicate that banks licensed in Switzerland extended credit facilities of CHF1.384m (utilised) and CHF1.752m (committed) to borrowers incorporated or resident in Switzerland, of which CHF1.196m were utilised mortgage loans. Commercial lending has risen gradually yet consistently in recent years, a pattern expected to endure, notably for individuals and small to mid-cap corporate borrowers. Switzerland’s market for syndicated loans has grown substantially over the last two decades; during the pre-2008 peak, commitment levels in the high three-digit millions were not unusual. The financial crisis, the more stringent Basel III capital requirements and the strong Swiss franc curbed Swiss banks’ appetite for very large exposures. Lately, Swiss-based syndicates have faced mounting competition from foreign arrangers of syndicated loans and managers of high-yield bond issues, particularly for major Swiss corporates and issuers, alongside private funds providing unitranche financings...

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...