Lma Definition of Group

The provisions of the AML offer two mutually exclusive options for establishing the identity of the group of lenders for additional facilities: it is common for incremental facility clauses to include provisions on the most favoured country („MFN“) according to which the price of additional facilities is not exceeded compared to the respective existing facility, unless the existing relevant facility also has an additional Price Advantage facility, to the extent that it prescribes the amount. The primary purpose of most-favoured-nation treatment is to protect the value of initial debt in the secondary market, and given that such provisions serve to protect existing lenders and prevail in the marketplace, it is perhaps not surprising that the provisions of the AML include restrictions on the price of an additional facility. However, a few points emerge when looking at the AML regulations. First, in true interpretation, the provisions of the AML do not contain a most-favoured-nation clause at all, since there is only a cap on total return that can be linked to any additional debt. While this has the advantage of simplifying LMA regulations, borrowers might find such a restrictive construction as it sets specific caps on the price of additional debt, which can limit a borrower`s ability to take on additional debt. Second, while the most-favoured-nation clause is generally related to yield and not just margin (although it is not uncommon for most-favoured-nation treatment to be tied only to margin), a borrower is generally free to negotiate the composition of that yield at his or her discretion. On the other hand, the provisions of the AML are highly prescriptive in that they not only limit the weighted average return (which includes margin, all costs other than commitment fees and the initial issue discount for primary syndication) that may be generated by the incremental facility, but also aim separately to limit commitment and arrangement costs, which is reflected in the current provisions for the increase of the facilities are no longer included. Finally, it is increasingly common for all most-favoured-nation clauses to include an expiry period of 6 to 24 months after which these price restrictions no longer apply, although this expiry may be extended or waived during primary syndication, and most-favoured-nation provisions increasingly apply only to additional maturity facilities levied in the same currency as the existing facility in question. However, the wording of the AML does not take into account any of the most-favoured-nation clauses mentioned above. In summary, therefore, while the AML`s price protection formulation is not entirely over-the-counter, it may not reflect certain elements of current market practice and certain options regarding the above points, in particular the possibility of including an expiry period and the ability of the borrowing group to borrow additional debt beyond the yield ceiling.

would have been welcome. The provisions of the AML simply provide for a tightly capped basket of additional debts that can accumulate, perhaps because of the inherent difficulty one faces when trying to devise language to consider different methods of determining the basis on which additional debt may arise. In practice, many clauses on additional facilities now allow the borrowing group to contract different tranches of debt, subject to compliance with various criteria. For example, it is common for a group of borrowers to benefit from: given the prevalence of additional facilities in recent years, many promoters and corporate borrowers who use additional facilities (or at least negotiate the option to include provisions on additional facilities), subject to the agreement of certain important commercial conditions with the group of lenders, have a preferred form of additional facility that they feel comfortable with and use accordingly for the majority of their loan financing operations. In this context, it remains to be seen whether the wording of the AML will be taken up in whole or in part by the credit market, while the provisions on additional facilities that the AML has included in its recommended form of leveraged facility agreement do not seek to take into account all the potential relevant variables observed in today`s additional facilities. They are a useful starting point, especially for a number of corporate borrowers and small and mid-cap spaces. Additional facilities exist to provide relatively rapid access to liquidity by approving in advance unduly committed additional maturities or revolving facilities without the need for the consent of the lender, which can be used, provided that the group of borrowers and the additional facility set up meet certain parameters agreed in advance. Additional facilities may be required for specific purposes. B for example for additional acquisitions (mainly uncommitted acquisition lines) or capital expenditures, or to meet general working capital needs.

The increased flexibility offered by progressive facilities has been particularly welcomed when borrowers have identified a growth or business strategy that requires future debt financing before the maturity of their core facilities. In the context of a rapidly changing and highly competitive M&A market, when the appropriate potential targets have become more limited and bidders are expected to act more and more quickly to submit certain bids to their funds, quick access to additional debt without having to go through a lengthy process of change and/or approval with the existing group of lenders, additional facilities become an attractive option for borrowers to negotiate in advance. Creation of the incremental lender group/right of first refusal of existing lenders1 The size of the gift basket is an important business consideration, and although, especially in the leveraged space, especially leading sponsors, often push for it to be measured in an amount equal to one or more rounds of EBITDA, the amount of the gift basket is more than a quarter to half of EBITDA. Often, the gift basket can be used once the group has reached its limits according to the debt ratio tests described above. Given the extent to which strong borrowers aggressively seek to increase the deleveraging capacity of the borrowing group, this gift basket may in some cases be subject to a growth element depending on the amount of EBITDA. In addition, the gift basket can sometimes be increased taking into account certain additions, such as. B amounts returned to the group of lenders pursuant to voluntary initial payments, debt buybacks, repayment after the exercise of a Yank the Bank provision and/or other commitment reductions to existing senior debt prior to the date of use of the relevant additional facility. . . .