Private Credit Deep Dives – Portability (Europe)

One of the foundational provisions negotiated in almost every European leveraged loan agreement is the "Change of Control" definition and associated clauses. This provision is crucial because it directly impacts the risk profile of the loan from the lender's perspective. Private credit funds and other lenders place significant importance on the identity of the sponsor when underwriting deals. Beyond the inherent credit strength of the asset in question, the sponsor's identity and its track record in managing similar assets are equally, if not more, important considerations.

In simple terms and when triggered, the change of control provision provides lenders with an automatic exit right (where all available commitments are cancelled and all outstanding loans become immediately due and payable) or a put option pursuant to which they can demand cancellation of available commitments and repayment of all debt. For a more detailed discussion on this topic please see Priva