Opublikowane: 11-12-2020

Investment Grade Agreement


Sponsorship is also a factor. It goes without saying that many debt-financed companies are owned by one or more private equity firms. These companies, such as Kohlberg Kravis – Roberts or Carlyle Group, invest in companies that have used capital structures. Since the sponsor group enjoys broad support from credit investors, a loan will be easier to unionize and therefore more expensive. On the other hand, if the sponsor group does not have a loyal group of relationship lenders, the agreement may need to be more valued in order to clear the market. For banks, the factors of ownership may include the bank`s participation in the sponsor`s capital fund. Among institutional investors, the balance sheet of a single deal sponsor is weighted in repairing its own operations depreciated by increasing additional capital or replacing a failed management team. MFN sunsetCe are agreements that end the MFN period after a fixed period of about 12 or 18 months after the end of income protection. Many negative agreements are structured with baskets that allow issuers to take certain measures – for example, paying dividends or making acquisitions – as long as the amounts involved remain within a specified range. In many cases, the agreement provides an initial capacity called the start-up basket, as well as additional capacity based on a percentage of free cash flow or net income called a basket of buildings. In addition to the credit agreement, there are a number of ongoing correspondences between issuers and lenders under confidentiality agreements, including quarterly or monthly financial information, compliance information, change and waiver requests and financial forecasts, as well as acquisition or order plans. Much of this information may be essential to the financial health of the issuer and may not be available to the public until the issuer has formally issued a press release or an 8-K document or other document is filed with the SEC.

As a result, the most profitable loans are those to borrowers financed by borrowing – those with speculative credit ratings (traditionally double-B plus and lower) and spreads (premiums via LIBOR or any other basic interest rate) are sufficient to attract interest from non-bank futures investors (this spread will generally be LIBOR-200 or more , although this threshold decreases depending on market conditions). Some loans have provisions that borrowers at the threshold of investment level and speculative grade must either provide guarantees or release them in the event of a change in the issuer`s rating.