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This Wednesday, We Asked, They Answered. Andrew Bettwy and Glen Lim of Proskauer Rose LLP address current developments in the refinancing markets below.
What are you seeing in the refinancing market lately ?
We have seen several deals undergo opportunistic refinancings recently. Often these refinancings take the form of an “amend to extend” transaction to push out the stated maturity of loans to a later date. We’re seeing arrangers and borrowers do this even when the maturity date of the loans is still a few years out, because they want to strike while the iron is hot and take advantage of good market conditions for issuers of syndicated loans. In conjunction with this process, borrowers may also attempt to enhance and upgrade their credit terms, depending on market appetite and the strength of the borrower’s financials and the overall health of its business sector. This may include repricing the interest rate to a lower margin or a lower LIBOR floor, upsizing the credit facility by obtaining incremental commitments, loosening certain covenants or other credit enhancements, or all of the above.
How should attorneys approach these types of refinancings? What are some issues to consider throughout this type of transaction?
Debt lawyers on both sides of the table should think of these refinancing occasions as an opportunity to bring up to speed credit documentation that may be a bit outdated in certain respects, and catch it up to prevailing credit agreement terms that have resulted from market and regulatory developments since the original closing. Depending how long it’s been since your credit agreement was first executed, several upgrades may be required. Here are just a few to consider:
Some other general and technical considerations to keep in mind when working on an opportunistic refinancing:
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