Covenants Analysis

Analysis on and research into global covenants with a focus on the largest and most complicated capital and corporate structures.

2021 Leveraged Loan Market Trends; MFNs, PetSmart, Lien Amendments

More recently than ever, the success rates for lenders to push back against terms in their agreements or to push for the inclusion of others have increased. 2021 leveraged loan market trends have taken a turn to benefit lenders, plus some terms that used to be considered aggressive are becoming more and more familiar in these amendments. Our Americas Covenants team analyzes and reviews some of the most prominent 2021 leveraged loan market trends emphasizing the fact that these are exceptions to the rule. 

First, the team discusses the most favored nations (MFN) protection where lenders have been trying to break down the strength of this protection agreement in terms of pricing differences, length and scope. Next, our Americas Covenants team takes a look at the anti-PetSmart guarantor protections where guarantors and liens on assets could be released in an easy manner creating credit agreement provisions that include the block of the release of guarantors. Further in the article, our team discusses provisions to erroneous payments as a result of the Revlon and Citibank mistaken wire transfer, transfers to unrestricted subsidiaries, and a few other provisions that are becoming increasingly more common including earlier maturing debt, debt using restricted payment capacity and more. Read our Americas Covenants team’s full analysis of the 2021 leveraged loan market trends here:

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New Coverage: Thryv Holdings Term Loan Covenants Analysis
Tue Mar 16, 2021 7:55 pm Covenants Analysis

With a focus on SaaS solutions, Thryv Holdings is a small business platform that acts as a predecessor to Dex Media, which declared bankruptcy in 2016. The company went public in October 2020 and now operates through two segments, its legacy marketing segment and its SaaS segment. During an earnings call from Q3 2020, billionaire hedge fund manager, John Paulson, asked about the possibility for Thryv to split and spin off of their higher growth SaaS business in which Thryv’s management responded “…perhaps we should do it sooner than we were thinking…” However, the Thryv Holdings term loan facility was refinanced on March 1, 2021 and the restrictions under the new term loan may create some issues in the plan to spin off the company’s SaaS segment.

Under debt documents and average circumstances, in order to spin off a business, they must be able to dispose of the segment and have sufficient restricted payment capacity to distribute the segment to its shareholders. The Thryv term loan does not directly permit dividends and distributions making it difficult to spin off its SaaS business segment without an amendment or waiver. Our Americas Covenants by Reorg team discussed the flexibility under the Thryv term loan regarding their general limitations, negative covenant capacities, financial maintenance covenant and their amendments and term loan buybacks. Read the full story here:

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Podcast: Abengoa Concurso Filing; MAB High Court Precedents
Mon Mar 1, 2021 8:56 pm Covenants Analysis  Financial Restructuring

Released bi-weekly, the EMEA Core Credit podcast focuses on European, Middle Eastern and African situations and companies in the distressed and high-yield space. Each episode also features a deep dive into a particular company or issue, discussing their developments and state of affairs in their respective space. This week, Richard Woolly speaks with the EMEA Core Credit legal team to discuss developments affecting schemes of arrangement and part 26a restructuring plans. 

The deep dive this week focuses on Spanish construction and engineering company, Abengoa and their restructuring agreements as well as the precedents set by MAB Leasing, a subsidiary to Malaysia Airlines, in the English High Court. Click through to listen to the full episode on Apple Podcasts, SoundCloud or Spotify.

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Priority Technology Holdings Term Loan Facilities Amendments
Mon Mar 1, 2021 8:51 pm Covenants Analysis  Financial Restructuring

Priority Technology Holdings Inc., an integrated payment software and commercial payment services provider based out of Alpharetta, GA, began to amend their senior term loan and subordinated term loan facilities in mid-March of 2020, but these amendments may hold back the company’s ability to grow through continued acquisitions. Their two owed term loan facilities are under separate credit agreements with multiple borrowers and guarantors including Pipeline Cynergy Holdings LLC, Institutional Partner Services LLC, Payment Systems Holdings LLC and Priority Holdings LLC. Priority Technology Holdings Inc. has previously been able to grow through acquisitions of whole companies and merchant portfolios, but with the amendments made in March 2020 the company now has limited covenant relief.

The amendments to their credit agreements made a few notable changes to their pricing / PIK premium, amortization of senior term loans, renewed call protection, restrictions on transfers of material intellectual property, removal of leverage-based baskets for stock buybacks and leverage-based conditions for accessing transaction baskets. Our Americas Covenants team broke down these amendments and came to a few covenant conclusions about Priority Technology Holdings’ liquidity and financial covenants, their debt and liens and the company’s dividends and transfers to unrestricted subsidiaries. Read our full analysis of the situation here:   

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Fourth Quarter Earnings Recap: Week of Feb. 22 2021

Fourth-quarter earnings season got underway in Europe under a cloud of sluggish business activity and delays in Covid-19 vaccinations across the continent. Travel and associated industries have reported tough periods – exemplified by Heathrow, once Europe’s busiest airport, saying this week that 2020 was the toughest year in its history – while companies in other sectors, including retail and automotive, posted better-than-expected results. Investors are nevertheless optimistic about the reopening of travel in the coming months with aviation and leisure debt already being lifted on positive noises from governments.

Next week Jaishree Kalia, Reorg’s Managing Editor of EMEA Middle Market, will be leading a webinar on the current outlook for European mid-market lending and how the impact of Covid-19 has shaped winning and losing sectors this year.

Sign up for our weekly updates here

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Podcast: The Impact of Equity Issuances, IPOs and SPACs on Companies’ Flexibility Under Debt Documents
Mon Mar 1, 2021 8:48 pm Covenants Analysis

Each episode of Reorg’s weekly podcast series, released Friday afternoons, features a look back at highlights and top stories from the previous week and a preview of what’s to come in the week ahead, followed by a deep dive on issues and companies in the distressed and high-yield space. This week, Peter Washkowitz, head of Americas Covenants, takes a deep dive into the impact of equity issuances, IPOs and SPACs on companies’ flexibility under debt documents. 

The deep dive talks through how proceeds from equity issuances and cash contributions flow through debt documents and how those amounts could potentially significantly increase a company’s ability to incur debt and liens, pay dividends or make investments including transfers to unrestricted subsidiaries. Click through to listen to the full episode on Apple Podcasts, SoundCloud or Spotify.  

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