As significant uncertainty and sustained volatility return
to the debt markets for the first time since the financial
crisis, we take this opportunity to reflect on some of the
private equity sponsor and borrower-friendly terms that have
become increasingly common in broadly syndicated loan (BSL)
facilities, as well as certain themes that emerged in 2019 and
early 2020. The most striking development has been the dramatic
increase in the number and size of facilities that direct
lenders have been willing to underwrite.
These alternative lenders are not only committing to take
all or a large portion of the junior capital in a structure
underwritten by BSL arrangers, but are now competing directly
with arrangers on ever larger financing transactions. The
cross-pollination of terms that results from this competition
makes the trends described below relevant not just to the BSL
market but also to alternative lending.
First lien debt...