Ari Blaut and Joyce Kwok Author Practical Law Article on Growing Trend in Acquisition Finance

October 24, 2019
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S&C corporate partner Ari Blaut and associate Joyce Kwok co-authored a new article in Practical Law describing a recent and growing trend regarding the covenant structure of second lien loans in first and second lien acquisition financings. The article, titled “Acquisition Finance: The ‘Inside Second Lien’ Covenant Structure,” begins by observing that second lien lending in the U.S. leveraged loan market “has recently become dominated by direct lenders.” This shift, the authors say, has seen it become increasingly common for privately placed second lien loans to have an increased number of covenant baskets and thresholds “set inside the corresponding first lien covenant baskets and thresholds.” This trend has been driven by the need for private credit to provide junior capital; as well as the fact that first lien arrangers are increasingly willing to go to market in the first instance with aggressive sponsor-favorable terms.
Ari and Joyce explain that these changes have important implications. To read their thoughts in the full article, click here.