Current European Leveraged Financing Terms Superthread
Hi forum,
Thank you in advance. Looking for current info leveraged financing for both mid market and LC LBOs:
- What are TLBs and Unitranches priced these days in Europe and UK?
- What reference rate are you using for your models, 3m forward Euribor for Euro and Sonia for GBP?
- What is the usual mandatory amortization + cash sweep on both TLBs and Unitranches?
- What covenants do you see often these days?
- What OID, fees, ratchets, prepayment penalties you seeing?
- Anything else that lenders want in the credit docs these days?
Based on the WSO Dataset, here's a detailed overview of the current trends in leveraged financing in Europe, particularly focusing on TLBs (Term Loan B) and Unitranches:
Pricing of TLBs and Unitranches:
Reference Rates:
Mandatory Amortization and Cash Sweep:
Common Covenants:
OID, Fees, Ratchets, and Prepayment Penalties:
Current Trends in Credit Documentation:
These points provide a snapshot of the current leveraged financing landscape in Europe, reflecting both the complexity and the dynamic nature of this market.
Sources: Overview of Leveraged Finance, Overview of Leveraged Finance, Leveraged Finance – 2017 Update, Leveraged Finance – 2017 Update, https://www.wallstreetoasis.com/forum/investment-banking/how-to-prepare-for-restructuring-technical-questions?customgpt=1
From an European mid-market credit fund:
Arrangement fees 2.5-2.75% (down from ~3% early last year, some players like Golub recently only wanted 2%)
Pricing around 5.50-6% depending on leverage and asset quality, even lower for top notch assets
Reference rate is 3M Euribor
Unitranche, thus no armotisation
Net leverage covenant is usually the only covenant, larger deals are regularly cov-lite (i.e. no covenant)
Ratchets and prepayment fees depends on the deal
.
Super helpful! Can we also assume 4.5x-5x LTM EBITDA leverage (for a high quality asset) is possible in this environment?
Absolutely
Everyone likely has a different definition for high quality assets but we mostly do tech/software and none of the assets we worked on in the past 12 months was below 5x, the best one's were closer to 6-6.5x.
Repricings seem to be very topical atm too - have there been any developments in flex provisions?
Could you explain your answer? What do you mean by flex provision?
A bank might sign commitment papers today but not get that paper out to market for months - in the event of adverse movements in secondary debt markets, flex provisions allow said banks to sweeten up the terms of the debt (as originally outlined in the termsheets) in order to avoid funding on terms that are viewed as unacceptable by market participants at the time of marketing/syndication.
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