The leveraged finance market has undergone a significant reset in the past two years, with rising interest rates, tightening credit conditions, and increased lender scrutiny fundamentally altering the negotiating dynamics that characterized the low-rate era. For borrowers and private equity sponsors, understanding which terms are negotiable — and how to negotiate them effectively — has never been more important.
This Guide provides a practical overview of the key provisions in leveraged loan agreements that borrowers should focus on in the current market environment, including: covenant structures and headroom; EBITDA add-back limitations; restricted payment and investment baskets; debt incurrence capacity; and cross-default provisions.
David K. Okafor, Partner and head of the firm's Banking & Finance practice, brings over 20 years of experience advising on leveraged finance transactions in North America, Europe, and Africa.