structuring term loan b transactions: combining high yield...
TRANSCRIPT
Structuring Term Loan B Transactions:
Combining High Yield Financing With
Conventional Bank Loans
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TUESDAY, MARCH 27, 2018
Presenting a live 90-minute webinar with interactive Q&A
Jeff Norton, Partner, Dechert, New York
Scott M. Zimmerman, Partner, Dechert, New York
Bridget K. Marsh, Executive Vice President - Deputy General Counsel,
The Loan Syndications and Trading Association, New York
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Structuring Term Loan B Transactions: Combining High Yield Financing with Conventional Bank Loans & First Out/Last Out Structures
Jeff Norton, Dechert, LLP
Scott Zimmerman, Dechert LLP
Bridget K. Marsh, Loan Syndication and Trading Association
March 2018
|
Agenda
1. Introduction
2. Basic Structure
3. Typical Covenants
4. Term Loan B Escrow Funding
5. First Out/Last Out Structures
6
|
1. Introduction
7
8
Primary Market for Highly Leveraged Loans Was Dominated by Banks…
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017
Banks & Sec. Firms Non-banks (institutional investors and finance companies)
Bank Share vs. Nonbank Share
Source: S&P/LCD
9 Source: Thomson Reuters LPC
US Corporate Lending Quadruples in 20 Years
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
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20
03
20
04
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20
08
20
09
20
10
20
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20
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20
13
20
14
20
15
20
16
20
17
I-Grade Leveraged Other
Bil
lio
ns
(USD
)
10
Institutional Tranches Account for the Majority of Leveraged Lending Volume
Source: Thomson Reuters LPC
0
20
40
60
80
100
120
140
160
180
Jan
-06
Jun
-06
No
v-0
6
Ap
r-0
7
Sep
-07
Feb
-08
Jul-
08
Dec
-08
May
-09
Oct
-09
Mar
-10
Au
g-1
0
Jan
-11
Jun
-11
No
v-11
Ap
r-12
Sep
-12
Feb
-13
Jul-
13
Dec
-13
May
-14
Oct
-14
Mar
-15
Au
g-1
5
Jan
-16
Jun
-16
No
v-16
Ap
r-17
Sep
-17
Issu
an
ce ($
Bil
s.)
Pro rata Institutional
11
US Secondary Loan Market Emerges in the 90s and Continues to Grow
$0
$100
$200
$300
$400
$500
$600
$700
19
94
19
95
19
96
19
97
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98
19
99
20
00
20
01
20
02
20
03
20
04
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05
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07
20
08
20
09
20
10
20
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20
12
20
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20
14
20
15
20
16
20
17
Annual Loan Trading Volume
Bil
lio
ns
Source: LSTA
|
Term Loan B (TLB)
• TLB is a bullet maturity term loan with covenant light features
• TLBs are a preferred financing for most institutional sponsors, due to flexibility they allow in the
capital structure and operations
• TLBs are an alternative or stop-gap to high yield bond (“HYB”) issuance for public borrowers, and a
HYB-like hybrid for private borrowers, but without public reporting or securities law risk
• Primarily used for acquisitions, recapitalizations, refinancings and leveraged dividends
• No uniform standard of TLB terms, but a lot of commonality in features
• TLBs can be done as First Lien/Second Lien, Unitranche, Stand Alone or with Attached Revolver
and/or TLA
12
|
Term Loan B vs Term Loan A
Term Loan B Term Loan A
No or minimal (1%) amortization Amortizing quarterly usually 5-20% per year
increasing closer to maturity
Pricing higher than attached Revolver Pricing usually same as attached Revolver
Tenor 5-7 years Tenor 3-6 years
Secured Can be Secured or Unsecured
Incremental facilities usually built in Typically no incremental facility provisions
Covenant Light Covenant traditional
Many have no financial maintenance covenants One or more financial maintenance covenants
Can be subordinated to revolver or other term
tranches
Typically not subordinated, would be scheduled
to be repaid first over attached TLB
13
|
Term Loan B vs High Yield Bond
TLB HYB
Firm underwriting amount, pricing & closing
date commitment
Amounts, pricing and closing dependent on
market conditions
Secured Unsecured (US), Secured (Europe)
No minimum deal size Issuance must be at least $100-150 million
5-7 year tenor 7-10 year tenor
Generally lower pricing (floating rate) and fees
(particularly if secured)
Generally higher pricing (fixed rate) and fees
(particularly if subordinated)
Senior/secured Generally unsecured/subordinated
Call protection is more limited; soft calls are
common
Call protection is higher and more fixed; “make-
whole” is common
Control over investor group Debt is freely tradable
Amendments and modifications are easier to
manage – require lender voting
Amendments and modifications are difficult and
expensive – require consent solicitations
No public reporting or securities law risk Public reporting and securities law compliance
is required
14
|
HYB Features that TLB Borrowers and Sponsors Want
• No or minimal amortization, limited mandatory prepayment events
• More flexible, self-adjusting covenants
• Relaxed defaults
• Ability to retire debt at market price (rather than at par)
• Ability to make significant corporate and capital changes without amendment – acquisitions,
dispositions, additional debt, IPOs, etc.
• Consistency of terms across financings (and, for sponsors, across portfolio companies)
15
|
2. Basic Structure
16
|
Typical TLB Facility Structure
• Firm underwriting amount, with pricing and closing date commitment; 5-7 year term
• Secured and guaranteed by all subsidiaries to extent practical
• Covenant-lite: deal has only one or no financial covenants
- Most common structure is no financial maintenance covenants for TLB
- If there is a revolving facility, it usually has a springing leverage ratio covenant (for the benefit of revolving
lenders only, and only when the facility is drawn above an agreed % of utilization), with 25-35% headroom to
sponsor projections and an equity cure
- Waiver and modification of springing leverage ratio covenant by more than 50% of revolving lenders only
• Some US investors require 1% annual amortization (paid quarterly)
• Pricing on both facilities is a floating rate, based on a margin above LIBOR (or base rate), commonly
with a floor (usually for TLB only) and adjusting based on a leverage or ratings grid
• Term loan usually issued with OID (1-2%), combination of OID and LIBOR floor gives some fixed
income attributes
• Term loan and revolving facilities are typically pari passu in right of payment and priority of liens
• 6-12 month 1% soft call (repricing protection)
17
|
Typical TLB Facility Structure (continued)
• Pre-approved but not committed incremental facility and refinancing/extension options
• Covenant package approaches:
- bank covenants with high yield modifications (incurrence tests, builder baskets)
- high yield covenants imported directly
• Defaults follow typical US bank default package but generally higher thresholds, acceleration and
enforcement are by joint majority (other than for springing financial covenant applicable to revolving
facility only)
• Amendments and modifications by more than 50% of all facilities, with most “sacred rights” limited
to affected lenders only (with the ability to work around dissenters), amend and extend mechanics
• Unrestricted Subsidiary concept
• In sponsor-backed deals, terms are often pre-agreed by reference to a sponsor precedent
18
|
Typical TLB Facility Structure – Guaranty & Collateral Package
• Upstream and cross-stream guarantees are easily obtainable from US entities that are
solvent
• There are no financial assistance/trapped cash restrictions in the US (so a target may
secure debt of its parent, which was incurred to acquire the shares/assets of that target)
• Security over all US personal property is obtained relatively easy subject to some significant
exceptions (real estate, vehicles, certain accounts) - UCC filings, possession of tangible
collateral (stock certificates), intellectual property filings
• In most US deals, the senior secured position is easy to obtain on day one over the US
creditor group through guarantees, pledges and UCC filings
• Guaranty and collateral issues outside the US are not uniform, more complicated and
subject to material restrictions (which may result in the need to review covenant baskets)
HYB: generally unsecured in the US and subordinated to specified senior debt with same
guarantor coverage; in Europe much more likely to be largest piece of the capital structure so
senior secured
19
|
3. Typical Covenants
20
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Revolver Springing Financial Covenant
• Customarily, a leverage covenant based on Net Debt to EBITDA
• Net Debt
- based on total debt, senior debt or senior secured debt (negotiated)
- netting of some or all unrestricted cash (capped vs. uncapped is negotiated)
• EBITDA
- pro forma cost savings, synergies, optimization adjustments for acquisitions, dispositions, reorganizations
- allows certain adjustments as projected by borrower (modified Reg S-X standard)
- component adjustments capped (usually a % of total EBITDA) unless Reg S-X compliant
• Tested quarterly only if revolver is drawn over a certain % (20-40% or more) of total revolving
commitments; typically with undrawn letters of credit up to a certain amount excluded
- Allows borrower the ability to repay and redraw around quarter end to avoid testing covenant
• For benefit of revolving lenders only, but if revolving lenders accelerate upon a financial covenant
default, then TLB lenders have the right to accelerate
• Equity cures becoming standardized
• More a liquidity test than a leverage test
21
| 13
Covenant Flexibility
• 3 main tools for covenant flexibility:
- Incurrence Tests
- Adjusting Baskets
- Basket Builders
• Many covenants use a combination of all 3 tools: general rule for borrowers is to use incurrence
test first for permitted actions and baskets last (keep powder dry)
| 14
Covenant Flexibility: Incurrence Tests
• Permit an action or define basket parameters based on satisfaction of a financial ratio test
- Leverage Ratio (Net Debt/4Q EBITDA)
- Interest or Fixed Charge Coverage Ratio (includes interest plus other fixed payments such as lease
payments) (4Q EBITDA/Fixed Charges or Interest Expense)
- Senior Secured Leverage Ratio used in Second Lien/High Yield Notes to set parameters of First
Lien/Senior Secured Debt Basket
| 15
Covenant Flexibility: Adjusting Baskets
• Adjusting baskets define their parameters not by reference to a fixed $ amount but to a % of:
- EBITDA
- Total Assets (tangible and intangible book value)
- Total Tangible Assets (PP&E book value)
- Total Income
• Basket adjusts with growth and performance of the business and acquisitions and dispositions
| 16
Covenant Flexibility: Basket Builders
• “Permitted Amount” or “Available Amount” or similar defined term is a basket builder concept
that can be used to increase set baskets
• Primarily used for Restricted Junior Payments (dividends and restricted investments) and
declaration of Unrestricted Subsidiaries, it can be spread amongst a number of baskets
• Cumulative building calculation creates free cash or a “wild card” basket that can be used across
multiple covenants (but no double counting)
• Basket builders allow the borrower to increase its capacity to take actions under those negative
covenants, based on the availability of some or all of the following components (on a cumulative
basis)
- starter basket (stated $ or % of EBITDA/Assets amount, more common in large deals)
- % of Excess Cash Flow not applied to prepay debt (or 50% of consolidated net income)
- equity contributions (other than equity cure)
- asset sale/insurance proceeds not yet reinvested or applied to prepay debt
- other income/special events or items (negotiated)
- other basket builders include caps by reference to a % of EBITDA or Assets
|
Indebtedness Covenant
• Indebtedness
- multiple agreed baskets and categories (and Permitted Refinancings thereof), used only
when ratio debt is unavailable
- Ratio Debt: incurrence of additional debt is permitted:
- if after giving effect thereto, the borrower would still be in compliance with a specified ratio (the
“incurrence ratio”), which may be a leverage ratio or a fixed charge interest coverage ratio (usually
2.00x)
- subject to additional conditions, including no default, weighted average life, and no maturity until after
the TLB maturity (91 days customary)
- some deals have different incurrence ratios for secured and unsecured debt
- some deals permit reclassification of basket debt to ratio debt – essentially resetting the basket to zero
when financial performance improves
- some deals permit contribution indebtedness – basket of 100-200% of contributed equity
HYB: Fixed charge coverage ratio or interest coverage ratio for incurrence test common
26
|
Lien Covenant
• Liens
- multiple agreed baskets and categories (and Permitted Refinancings thereof), used for customary items
- general basket subject to stated maximum amount or % of total assets
HYB: liens on senior debt permitted
liens on other specified debt or in general, commonly permitted as long as springing pari
passu lien for notes
27
|
Restricted Payment/Dividend Covenant
• Restricted Payments/Dividends
- multiple agreed baskets and categories (on an annual or cumulative basis), used for customary items or
when basket builder or general basket is unavailable
- use of any basket builder is subject to additional conditions, including no default and compliance with an
incurrence ratio and, in the case of a general basket, sometimes a stated maximum $ or % of EBITDA/Assets
amounts
28
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Investment/Acquisition Covenant
• Investments/Acquisitions
- multiple agreed baskets and categories (on an annual or cumulative basis), used for customary items or
when basket builder is unavailable
- plus unlimited if funded with Permitted Equity and/or basket builder
- Permitted Acquisitions are usually a separate category that is defined and subject to additional conditions, for
good credits, commonly now limited to:
- no default
- same or similar line of business
- acquired entities providing guaranties and collateral, if applicable
- additional debt incurred for Permitted Acquisitions is allowed subject to leverage ratio compliance (or
existing leverage ratio level not increasing as a result of such incurrence). Some deals use
interest/fixed charge coverage for this test.
HYB: common to have no restrictions on acquisitions into Restricted Subsidiary group
29
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Disposition Covenant
• Dispositions
- multiple agreed baskets and categories (on an annual or cumulative basis), used for
customary items
- subject to certain conditions, including:
- a cash consideration threshold (75%)
- fair market value
- proceeds used for reinvestment or debt repayment (negotiated)
30
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Unrestricted Subsidiaries
• Customary for HYBs, becoming common for TLBs
• Unrestricted Subsidiaries are:
- not guarantors or pledgers
- not subject to compliance with covenants or required to make mandatory prepayments
- excluded from calculations (e.g. EBITDA and Excess Cash Flow)
- “ring-fenced” from the credit group; transactions have to be arms-length
• Unrestricted Subsidiary designations are usually tied to the investment covenant, capped in size
(often a $ and/or a % of EBITDA) and subject to other conditions, including no default
• Restrictions on frequency of designating Unrestricted Subsidiaries and designating Restricted
Subsidiaries (negotiated, but often one re-designation per subsidiary)
31
|
Events of Default
TLB: Follows typical US bank default package
but generally higher thresholds; acceleration is
by a majority
HYB: defaults more limited, thresholds typically
higher than bank debt; acceleration by trustee
or 25% of holders
Payment (5 days grace on interest; no grace for principal) Payment (30 days grace on interest; no grace for principal)
Breach of negative covenants (no grace (but for equity cure)) Breach of Offer to Purchase undertakings (no grace)
Breach of other covenants (30 days grace after earlier of
knowledge or notice from agent)
Breach of covenants (45-60 days grace after notice from Trustee
or 25% of holders)
Cross default to Material Debt Cross acceleration to Material Debt
Judgments (non-appealable, above threshold, 60 days grace)
Judgments (non-appealable, above threshold, 60 days grace)
Insolvency
Insolvency
ERISA events (above threshold)
Invalidity of loan documents, release of collateral
Change of Control COC not a default but triggers offer to purchase at 101%
Material failure of representations Not a default but court action for material misrepresentation/failure
to disclose can be brought
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6. Term Loan B Escrow Funding
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Term Loan B Escrow Funding
• Escrow Funding used for acquisition financing in High Yield Market to have certainty of funds for:
- deals with a long stop date (e.g. extended regulatory approvals)
- secure funds at favourable pricing in a moving market
• Typical TLB approach to extended acquisition commitment period is pricing - usually an increasing ticking
fee
• Some TLB Commitments for deals with long stop dates have started using escrow demand rights but
actual escrows in this market are rare
• Advantages for Lenders with Escrow:
- Commitment terminates upon funding in to escrow
- Lenders receive full pricing and coupon from day one of funding
- Broader syndication possible with funded debt vs undrawn commitment
• Disadvantages for Lenders with Escrow:
- Restrictions of existing debt usually require borrower to be a shell company or unrestricted subsidiary of the buyer
pending the acquisition
- While interest on loan will accrue during escrow, lenders have to rely on over advance of funds for anticipated interest
coverage and/or investment of funds to provide for payment of interest
- Covenant protection limited during escrow, usually confined to borrower maintaining shell status and not pledging escrow
34
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Term Loan B Escrow Funding Continued
• Bankruptcy concerns
- Escrow agent insolvency: funds should not be part of the escrow agent’s estate and escrow should continue
- Escrow borrower insolvency: risk of escrow being recharacterized as a loan secured by the escrow and thus part of
the estate
- Best protection is to use independent escrow agent and bankruptcy remote SPV for escrow borrower
35
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7. First Out/Last Out Structures
36
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First Lien/Second Lien transactions vs. First Out/Last Out transactions
• Documentation – first lien/second lien transactions are done on two separate sets of documents,
whereas first out/last out transactions are on one set of documents (generally with an Agreement
Among Lenders dealing with intercreditor issues).
• Liens – in a first lien/second lien context, each set of lenders has their own liens with an
intercreditor agreement governing their relative rights, whereas in a first out/last out transaction,
one agent has a lien on behalf of all lenders.
• Priority of payment – a majority of first lien/second lien intercreditor agreements deal solely with
lien priorities and are silent as to payment priority (although in most cases, second lien facilities do
not have amortization prior to maturity), whereas first out/last out agreements among lenders
provide for payment priorities both pre-default
(e.g. amortization, mandatory prepayments, etc.) and post-default (from proceeds
of collateral).
37
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Unitranche vs First/Second Lien Structure
TLB First/Second Lien
Single Credit Agreement, one term loan (AAL designated
tranches)
Two Credit Agreements with Second Lien cushioned off the First
Lien
Single blended interest rate (AAL allocates between risk
tranches)
Separate Interest Rates
Single Security Documents and Filings
Separate Security Documents and Filings
AAL has both payment and lien subordination of Last Out
Tranche
Intercreditor has lien subordinations but no payment subordination
Single Mandatory Payment mechanism (AAL waterfall splits
between tranches)
Separate Mandatory Prepayments with First Lien having first
access to prepays
Single voting mechanic (with AAL governing tranche voting)
2 Credit Agreements vote separately
Enforcement governed by AAL (many similar concepts to 1st/2nd
Lien Intercreditor)
Enforcement governed by Intercreditor
Borrower sometimes acknowledges AAL Borrower usually acknowledges Intercreditor
38
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Advantages from Borrower perspective
• Ease of execution – typically first out/last out transactions can be closed on a quicker timeline than
a first lien/second lien or senior/mezzanine structure.
• Lower costs – given that the company only has to negotiate one set of documents.
• Pricing – generally closer to a first lien/second lien transaction and more favorable than a
senior/mezzanine transaction.
• Easier compliance and administration when only dealing with one set of documents.
- But not in every situation – Agreement Among Lenders
39
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Nature of First Out/Last Out structures
• No clear market. Transactions come in many different flavors and the terms vary greatly from
transaction to transaction and from lender to lender.
• With one exception, agreements among lenders have not been tested in a
bankruptcy court.
- In re American Roads LLC – 496 B.R. 727 – lenders party to a unitranche facility in which they granted an agent
the right to direct exercise of remedies objected to the actions of the agent. Recognizing the validity of the
agreement among lenders as an enforceable intercreditor agreement in bankruptcy, the court found the lenders
not to have standing in the case to object.
40
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Key Definitions
• First Out Cap Amount
• Exercise of Remedies
- Practical reality is that you need the Agent to take action
• Voting Rights Event/Waterfall Trigger Event (application of proceeds of collateral)
- Payment Default
- Bankruptcy
- Financial covenant default
- Acceleration/Exercise of remedies
- Failure to deliver financial statements
41
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Buy Out Right
• Very similar to buy out rights in First Lien/Second Lien transactions (e.g. how to deal with bank
product obligations, letters of credit, prepayment penalties, etc.).
• Agreements vary as to whether there are reciprocal buy out rights for both First Out and Last Out.
• Last Out may exercise a buy out right so they can preserve the value of their last out position and
control the exercise of remedies. Last Outs have a larger stake in maximizing value since they only
get paid after the First Out. Last Out Lenders could also have a loan-to-own strategy.
42
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Buy Out Right
• Buy Out Triggers
- Payment Default
- Bankruptcy/Insolvency Event
- Acceleration
- Exercise of Remedies
- Failure of a tranche to vote in favor of an amendment or waiver
43
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Right of First Refusal/Right of First Offer
• Right of First Refusal will create difficulty for lenders to sell out of their loans. Lender will need to
go out to the public first.
• Right of First Offer is much better for the selling lender.
• Depending on the transaction and the relative bargaining power of the first out and last out lenders.
• Right of First Offer should be offered to Lenders in the same class first.
• Assignments are still subject to Credit Agreement limitations.
44
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Exercise of Remedies
• Key provision – determines who controls the exercise of remedies upon a default.
- Practically the Agent will be holding the collateral and will be the party to control agreements and other collateral
documentation.
• Conflict between First Out and Last Out interests - First Out wants to get paid out, but Last Out has
greater interest in maximizing value.
• Standstill Periods
• Triggering events
• Changing of the guard concept – should first out still control if they get paid down below a certain
threshold?
45
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Voting Agreement
• Typically, prior to a Voting Rights Event, Required Lenders control.
- Often one class will be larger than the other, so they effectively will control. This often creates a
tension in the negotiation.
- One potential resolution where there are only two lenders is to have Required Lenders require more than 1
Lender.
- Some AALs provide that Required First Out and Required Last Out lenders will be required for a Required
Lender vote prior to a triggering event.
- Some AALs allow one class to control other than in specific circumstances.
46
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Voting Agreement
• After a Voting Rights Event, amendments may require both Required First Out and Required Last
Out Lenders.
• Market used to be that Borrowers were blind to these arrangements. In the current market the
Borrower typically reviews (and may acknowledge) the AAL.
47
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Voting Agreement
• Agreements may set forth certain negotiated rights which would require the vote of both classes of
lenders.
• Agreements Among Lenders will also contain provisions to deal with the mechanics of the voting
agreement in circumstances where the voting thresholds in the Agreement Among Lenders are
different than as set forth in the definition of Required Lenders in the underlying credit agreement.
48
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Voting Agreement
• Cross-over voting - If a lender in one tranche purchases loans in the other tranche, do they have a
voting right with respect to that tranche? This would allow a lender to drive decisions in one
tranche to benefit the other tranche.
- Many AALs prohibit lenders from being cross over lenders.
- Others allow lenders to cross over, but will limit the voting rights of cross over lenders in the tranche it crossed
into until it owns in excess of a specified percentage of the class it crossed into.
49
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Allocation of certain payments
• Deals with allocation of amortization payments, optional prepayments and
mandatory prepayments.
- There is no market rule for how payments are allocated among the First Out and Last Out Lenders.
- Traditionally, all payments would be paid to the First Out until they are paid in full and Last Out will get nothing.
- Some agreements provide for pro rata sharing prior to a triggering event, or prior to certain other events (e.g.
leverage ratio falling below a specified threshold).
50
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Allocation of certain payments
• Collateral Waterfall – will provide that proceeds of collateral are applied to obligations owing to the
First Out Lenders prior to the payment of any obligations owing to the Last Out Lenders.
• Interest allocations
- Interest rate in the Credit Agreement will be a blended rate.
- Historically, the AAL will allocate the interest split. In more current deals, often the interest split is covered
directly in the Credit Agreement.
- ASC 860 – BDCs are required to continue to account for loans they have sold to other lenders as
participations, unless certain conditions are met that make the transfer a “sale”. This could cause issues for a
BDC (e.g. the sale is treated as a liability for purposes of the asset coverage test).
- First Out Lenders typically paid at a rate similar to typical senior debt.
- Last Out Lenders will be paid a higher margin as compensation for taking a greater risk.
51
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Bankruptcy Provisions
• Some AALs include full blown bankruptcy provisions akin to First Lien/Second
Lien deals.
- These deal with who can provide a DIP, control over the plan and 363 transactions, relief from the stay and
adequate protection identical to First Lien/Second Lien transactions.
• Others are silent on bankruptcy provisions and only address the relative payment priorities and
exercise of remedies outside of bankruptcy.
52
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Bankruptcy Issues
• Debtor in Possession Financing - who can provide DIP Loans is a highly
negotiated issue.
- If the Last Out Lenders provides a DIP and roll up their loans, they will effectively leapfrog the First Out Lenders.
- Even without a roll up, the DIP provider will have greater control over the process as the DIP lender and can
drive the process to benefit their prepetition loans.
53
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Bankruptcy Issues
• Classification – typically AALs provide that the First Out and Last Out will be treated as separate
classes. This has not been tested in a bankruptcy court and it is unlikely that a bankruptcy court
will agree to different classification.
- Impacts whether the loans will be viewed as over- or under- secured, which affects how the
court will treat the loans for post-petition interest, adequate protection and certain voting rights in
bankruptcy, including the right to vote on a plan.
- As a practical matter, for purposes of voting on a plan of reorganization, bankruptcy courts will
likely treat them as one class, and many AALs have extensive provisions to treat the First Out
and Last Out Loans as separate classes for purposes of voting in a bankruptcy.
- If the First Out Loans and the Last Out Loans are treated as a separate class, 2/3 of the amount of each
class and more than 50% in number would be needed to the extent such class would have the right to vote
their claims.
- If they are classified in the same class, the First Out Lenders will have the right to vote on the plan except
to the extent that they receive the indubitable equivalent of the value of their claim.
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For further information, visit our website at dechert.com. Dechert practices as a limited liability partnership or limited liability company other than in Dublin and Hong Kong.
Dechert lawyers acted on the matters listed in this presentation either at Dechert or prior to joining the firm.
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