Do Direct Lenders offer amortizing loans?
Hope this isn't a silly question - but I can't find examples of private credit lenders doing something other than non-amortizing loans (unitranche, mezz). Does this happen?
Thanks!
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They can, but TLB more prominent due to the nature of LBOs
Yes, but most times sponsors want to minimise cash leaving the business so will be more common to see TLB
They do. Amort is typically 1% as others above have mentioned (like TLBs). Would note that what direct lenders offer isn’t synonymous with TLBs since direct lenders often get a better credit agreement than what is offered in broadly syndicated land but that’s a separate topic… in more bespoke situations where a financing process is less competitive or the business is at risk of, or is currently in, secular decline, amort will become more common (usually in range of 5-10% per year)
As someone looking at the private credit market from the outside (I work strictly on syndicated financings, unfortunately, where are the primary areas of a credit agreement you see tightened up vs a syndicated doc?
I’m assuming tighter RPs / investments baskets, tighter CoC definition, maybe more favorable ECF sweep thresholds (or lower minimum ECF $ threshold) etc…but curious what else and how covenants differ
Main items are better covenants (ie they actually have a covenant, how real this covenant is will be situation dependent), better ebitda definition (ie there is a cap on add back amounts), and then tighter negative covenants through RP and incremental debt capacity as you mentioned.
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