Articles by author
The rise of NAV financings: is an equity contribution really “equity”?
Leveraged buyouts have traditionally been funded principally by debt secured against the collateral of the asset being acquired (typically borrowed by the acquisition special purpose vehicle, onward lent, and secured against the underlying collateral), combined with a sponsor equity commitment. To this, debt and equity commitment letters are commonplace within acquisition processes, and there is a clear expectation – both from sellers, and the acquisition financing provider – that the sponsor is committing true equity into the structure. However, as rising costs of capital have made investment returns more challenging, sponsors have looked to more creative ways to assist in levering their equity contribution, including by way of the incurrence of NAV financings. NAV financings used in this manner can mask the underlying nature of the equity commitment and, in a downside scenario, potentially lead to significantly more complex, and uncertain, workouts.
30 SEP 2024Financial collateral and Brexit: a comparative perspective
The EU directive on financial collateral (EU Directive 2002/47/EC) (Directive), as implemented in the UK remains (with amendments) on the statute book and has not been directly impacted in any meaningful sense by Brexit. However, given the latitude inherent in the Directive, a marginally fractured legislative landscape has resulted across the member states.
1 JUN 2021A review of private credit in the immediate wake of COVID-19
In the aftermath of the global financial crisis, private credit institutions emerged as being able to offer flexible financing solutions on short timeframes when compared to more heavily regulated banks. Traditional bank lending inevitably had slower processes and more limited scope to support nuanced credits. The strengths of the private credit model may well permit those institutions to advance their position further in the post-pandemic landscape. Whilst all private credits funds have as their objective a strong economic return, the context of each investment will determine the optimal approach each institution will employ to achieve that result.
1 JAN 2022The growing emergence of competitive tension in the liquidity market
In the current climate, borrowers are more likely to encounter liquidity issues rather than covenant breaches and are increasingly turning to private credit for time-sensitive cash injections, primarily due to the flexibility private credit providers offer. As these new creditors enter the debt stack, conflicts between them and existing creditors may well emerge. Sponsor-backed borrowers are increasingly deploying tactics popularised in the US to prime existing lenders who fail to follow their money. However, the need for new money to have super-seniority, to benefit from downside protection and obtain access to upside recoveries requires creative structuring.
1 DEC 2022Transferability: does there need to be a re-balance?
In the period leading up to (and during) a default or distress, the ability to trade loan positions takes on renewed significance, with transferability provisions in sharp focus. In recent years, the move towards more borrower/sponsor friendly documents has resulted in more restrictive “approved” lists and blanket restrictions on transfer to certain types of transferees (without consent). With those constraints driving more limited liquidity in the secondary market, it may be time to reflect on the extent of transfer restrictions, particularly where in practice, it may be beneficial to a borrower to move the debt away from the traditional lenders.
1 MAR 2024
