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ARTICLE · 01 AUGUST 2013

An Expert’s View

Pepper Hamilton LLP
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A discussion on what are the key developments in loan documentation that have been seen in the middle market in the first half of 2013.

United StatesFinance and Banking
Paul Hespel
Paul Hespel

What were the key developments in loan documentation that you saw in the middle market in the first half of 2013?

Credit demand continued to exceed credit supply, which was the predominant driver of a number of developments. First, the flexibility typically found in the documentation for large syndicated financings continued to find its way into middle market transactions, including the lower end of the middle market. In particular, we saw:

  • More permissive add-backs to EBITDA than in the past, although still subject to caps and baskets or, in the lower end of the middle market, subject to approval rights.
  • Step-downs in leverage ratios and step-ups in fixed charge coverage ratios (if any) that are more spread out over time and smaller in amount.

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