Incremental facilities definition

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Acquisition finance—senior facilities

Acquisition finance—senior facilities This Practice Note is intended as an introduction to facilities typically contained in a leveraged senior facilities agreement (SFA) and covers: • the main characteristics of each type of senior facility • typical senior lenders • documenting the terms of the senior facilities, and • the security and intercreditor position of senior facilities. For an introductory guide to acquisition and leveraged finance, see Practice Note: Introductory guide to acquisition finance. For more detail on typical terms applicable to senior facilities, see Practice Note: Introductory guide to leveraged finance facilities agreements. An explanation of many of the terms used in this Practice Note can be found in the Glossary of acquisition finance terms and jargon. Overview of senior facilities The senior facilities that may be provided to the group can broadly be divided into three types: • the main term facilities, used for the acquisition (or refinancing or recapitalisation, as applicable) • other term facilities eg incremental facilities, capex and/or further acquisition facilities, and • working...

Acquisition finance—mandatory and voluntary prepayment clauses

Acquisition finance—mandatory and voluntary prepayment clauses It is common for facility agreements to require the borrower(s) to prepay all or part of the facility on the occurrence of certain events, known as mandatory prepayment events. For a general discussion of common mandatory prepayment events, see Practice Note: Repayment, prepayment and cancellation. Leveraged facilities agreement have traditionally contained a more extensive list of mandatory prepayment events than an investment grade loan agreement. Mandatory prepayment events on leveraged finance transactions have typically included: • illegality—where it becomes illegal for a lender to continue to fund its participation, this triggers mandatory prepayment of that lender's participation • change of control/exit—where the sponsor(s) no longer controls the business, this triggers mandatory prepayment of all the facilities (see Acquisition finance—mandatory and voluntary prepayment clauses below) • receipt by the group of disposal proceeds, proceeds of insurance claims and proceeds of claims under acquisition documents (proceeds)—this obliges the group to apply the proceeds towards prepayment of the facilities (subject to exceptions) (see Proceeds below), and...

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LIBOR transition — what’s still outstanding?

LIBOR transition — what’s still outstanding? All currencies and tenors of LIBOR ceased or became unrepresentative at the end of December 2021 with the exception of overnight, 1, 3, 6 and 12 month USD LIBOR which continues to be published until end-June 2023. Fast forward four months and what progress has been made and what, if anything, is there still left to do?   Synthetic LIBOR and statutory replacement rates For the currencies and tenors that have now ceased or become unrepresentative, it is fair to say that, after a great deal of work from regulators, industry bodies and market participants themselves, the transition to risk-free rates has been fairly smooth. 1, 3 and 6 month GBP and JPY LIBOR continue to be published as ‘synthetic’ LIBOR for the time being, but, as noted by the Bank of England in its meeting on 26 January 2022, the number of legacy transactions relying on them is relatively small, assisted by widespread adherence to the ISDA Protocol and a...