Private Credit Explained - Delayed Draw Term Loans

A typical European leveraged loan will comprise of various tranches of debt, for a variety of purposes, all documented within a single facilities agreement. In a leveraged buyout scenario, the standard structure will be a term loan to finance the acquisition (typically either a unitranche loan provided by one or more private credit lenders or a term loan B in the broadly syndicated loan ("BSL") market) with, in each case, a revolving credit facility provided for working capital purposes. Depending on the business model and any anticipated future acquisitions, the sponsor may also wish to consider additional lines of liquidity.

The sponsor may need committed financing, for anticipated acquisitions in the future, but may not wish to pay the full interest expense on that portion of the committed debt until the funds are actually required. This future financing requirement can be structured as an additional term facility with delayed draw mechanics, for specific