Mezzanine is typically provided by institutional investors such as funds that invest in leveraged loans, pension funds, hedge funds, and specialized mezzanine homes. Given the prevalence of progressive facilities in recent years, many promoters and debtor companies using additional facilities (or at least negotiating the option of including provisions on additional facilities in facility agreements), subject to agreements with the lender group on certain key commercial conditions, will have a preferred form of additional facility provisions, with whom they put them at ease and, therefore, who use them 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. For introductory information on funding sources for leveraged financing transactions and how mezzanine fits into the capital structure, see Practice Note: Funding Sources for Debt Buybacks. The mezzanine installation is documented by a mezzanine installation agreement (MFA). While there are usually significant differences between the elder`s conditions, this practice note covers the typical features of the mezzanine installation and explains the main changes needed to convert a seniors` installation agreement into a mezzanine installation agreement. It should be remembered that, while the AML documentation can be confidently described as the possible requirements of banking institutions, the AML will not include purely market-specific or potentially transaction-specific provisions in its documentation. It should also be noted that the LMA has adjusted the recommended form of senior/mezzanine inter-creditor agreement to include certain necessary revisions in the event that the relevant senior facility arrangement includes an additional facility; Such changes between creditors are certainly useful and, it is assumed, will be used by the market in general.

The basic structure of the provisions of the AML will essentially be known to many; Generally speaking, the provisions begin with the establishment of the incremental facility lender group, go into the details of the mechanical process of setting up the incremental facility, and then set out the conditions and restrictions for the assumption of this additional debt before ending with the standard provisions for the implementation of the incremental facility on the respective creation date. The AML regulations offer two mutually exclusive options for establishing the identity of the incremental facility lender group: These documents (this term includes, where context permits, text, content, spreadsheets with macros and electronic interfaces, and the assumptions, transformations, formulas, algorithms, calculations, and other mathematical and financial techniques on which they are based) are presented to members of the Loan Market Association. in Compliance with the Statutes of the Loan Market Association (a copy of which is available here) to facilitate the documentation of transactions on the credit markets. None of the Loan Market Association, Allen & Overy or Clifford Chance accepts any responsibility for the use of these materials or for any loss, damage or liability arising from such use. None of the members of the Loan Market Association, Allen & Overy or Clifford Chance have reviewed the laws of any jurisdiction that could apply to either party to an agreement using these documents and their subject matter. Members should therefore review all relevant legal, accounting and regulatory matters before using these documents or entering into a transaction between them and, where appropriate, consult with their professional advisors. Looking in a little more detail at the AML provisions, there are some issues common to most incremental facility clauses, such as the inclusion of maturity date limits (which cannot be included in the maturity date of the equivalent existing facility) and depreciation profiles (incremental facilities should have bulleted redemption profiles, unless the depreciation profile has a weighted average). Service life equal to or greater than the equivalent existing depreciation installation). all of which largely follow the current market.

But even in some cases, the market has been evolving for a long time. Below we discuss some of these provisions. The size of the gift basket is an important business consideration, and although, especially in the leveraged field, especially top sponsors, often push for it to be sized at 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 also be increased by taking into account certain addbacks, such as .B. amounts returned to the group of lenders for voluntary upfront payments, debt buybacks, repayments following the exercise of a yank the Bank provision and/or other reductions in commitments on existing senior debt prior to the date of mobilisation of the relevant additional facility. In addition, the borrowing group often has the possibility to absorb all or part of its additional debt capacity outside the parameters of the credit agreement as ancillary and/or refinancing debt, which is not provided for in the provisions of the AMLA. 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.

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