Our Legal Insights Blog

Last week, I wrote about the magic of a blackline in the context of analysing docs for a repeat issuer or in a refinancing. Nothing else highlights key changes quite as well, as demonstrated by Lottomatica’s added bells and whistles in this week’s offering of senior secured fixed and floating rate notes. TLDR: Lottomatica is getting a flexibility upgrade, whilst lender protections are watered down.

Last night, I ran a blackline of Fedrigoni’s new seniorsecured notes (the May Notes) against January’s (the January Notes), and found twoimportant features – one of which can be used to make a relative value comparisonbetween the two series. 1. The May Notes contain two valuable redemptionfeatures for the borrower, with a third additional kicker folded in,that the January Notes do not have, making the January Notes moreeconomically protective for investors. 2. The May Notes and the January Notes back-datethe builder basket to the start date for the builder basket of thebonds that are being refinanced, but fail to disclose the built-up capacityunder that basket, making it a kind of “hidden” source of capacity.

April 25, 2024 – London, United Kingdom: Online legal education provider Fox Legal Training today announces the launch of a new educational webinar series on leveraged finance covenants that will use high yield deals in the primary market as a teaching tool for market participants.

In light of the recent news that a well-known telco borrower is using assets transferred to an Unrestricted Subsidiary as leverage for lenders to participate in discounted debt buybacks, we thought it was a good time to highlight potential sources of Unrestricted Subsidiary investments capacity in the average leveraged finance deal.

Last week I had the pleasure of witnessing the progress of one of my students in real time. Having joined the course only a few weeks ago, he sent over a completed covenant capacity grid for my review ahead of a catch-up call. What I saw absolutely thrilled me – the grid was almost flawless, highlighting nearly every significant basket across debt and liens, restricted payments and permitted investments. His work showed the tangible benefits of dedicated study and proved the thesis that underpinned my establishment of FLT.

According to a recent newsletter from the restructuring news outlet PETITION, the amount of distressed paper in the market is down significantly from the start of the year, and according to JPMorgan this is in large part due to the high number of liability management transactions (LMTs).

In the final episode of our series on Debunking Common Covenant Myths, we clarify the wide flexibility that management has to apply asset sale proceeds. Some market participants believe that asset sale proceeds can only be applied to repay debt or reinvest in the business.

The fourth in our series of common covenant myths is that EBITDA add-backs are only found in the definition of “Consolidated EBITDA”, and nowhere else in the offering memorandum or senior facilities agreement.