February 2018

A Good Night’s Sleep

By Melissa Seamans

Term of the Month

By Nee Ly

Sidecar Facilities

In a traditional structure, incremental loan facilities are issued under the same credit agreement with similar terms and conditions as the underlying credit facilities with exceptions, if permitted, typically involving issuance fees, maturity, amortization and pricing. Historically, incremental loans were generally included only in large cap and large middle market loans. Recently, due to a relatively liquid market environment and lender competition, it’s not atypical to find these accordion provisions in smaller middle market loans as well.   Within the current market environment, covenant-lite structures have increased significantly and now account for approximately 75% of all U.S. leveraged loans issued, as reported in February 2018 by LCD (a part of S&P Global Market Intelligence).

The prevalence of covenant-lite credit structures has led to innovative provisions such as a sidecar facility, which is an incremental loan that is issued as a separate facility outside of the existing credit agreement with terms and conditions that may or may not be similar to that of the underlying credit facility. Dissimilarities may involve any number of terms including financial covenants, maturity, security, or potentially the allowance of additional incremental loans. As a means to manage the additional risk inherently created by sidecar facilities, intercreditor agreements, to prioritize lien positions and security interests, are commonly attached to the underlying credit agreements and required from all incremental lenders.

Source: LeveragedLoan, Forbes, Financial Times, S&P Global Market Intelligence

Bits & Pieces

By Jeff Torrison

  • Chipper Jones and Ken Griffey Jr. are the only former number one overall draft picks in the Baseball Hall of Fame.
  • California ratified the 14th Amendment to the Constitution in 1959. This was ninety-one years after it went into effect.
  • Maryland ratified this amendment in 1959 and Kentucky in 1976 after both first rejected it in 1867.
  • February has four, full seven-day weeks once every six years.
  • The Hawaiian Islands have about 88,000 cesspools per a February 12, 2018, article in The Wall Street Journal. That equates to about one temporary sewage storage site per 16 residents.
  • Each day 10,000 Americans turn 65 years old according to an article in the February 10, 2018, issue of The Economist.
  • William Seward asked Great Britain to give Canada to the US as compensation for damage done to the US by British-built ships during the Civil War. Seward was US Secretary of State from 1861-1869. Great Britain, as you know, did not agree to these terms.
  • Over the past one hundred years, Americans have become 90% less likely to drown, 92% less likely to die by fire, and 95% less likely to be killed while working according to a February 10, 2018, article in The Wall Street Journal.
  • France hosted the first Winter Olympics in 1924. One of the participants was eleven-year-old figure skater Sonja Henie who placed last that year but went on to win gold medals in the next three Winter Olympics. Henie also had a successful movie career after she stopped skating competitively.