23 September 2016
8 February 2017
18 May 2017
19 September 2017
9:00 - 17:00
Cost£695.00 + VAT
(£834.00)Download this course outline
This programme covers financial covenants in Loan Agreements and includes specific reference and analysis of the terms and definitions as used in the LMA Senior Facilities Agreement for Leveraged transactions and covenants which appear in the LMA Real Estate precedents but consideration will also be given to current developments in the market particularly the larger syndicated (TLB-style) deals which no often include Springing Leverage covenants. The programme will also cover the typical covenants encountered in Infrastructure and Project Finance transactions
The loan market in Europe is bifurcating into two main approaches to loan documentation; smaller club and bilateral deals which broadly follow the more lender-friendly LMA approach and larger syndicated TLB-style deals which, increasingly, are being influenced by the high yield bond market and adopt a Cov-loose or Cov-lite approach where some deals now have only one or two financial covenants and occasionally none at all.
The larger syndicated TLBs also vary in approach with 2 slightly different approaches depending on whether they are English law or NY law (for example, the latter do not usually permit overcures or require prepayment of loans from equity cure cash). Direct-alternative lenders also tend to adopt a more borrower-friendly approach to the terms in the loan and the financial covenants.
Financial covenants are arguably one of the most heavily negotiated aspects of the Loan Agreement. Too often some parties fail to understand the key issues that really matter, for example, they view the financial covenants in isolation rather than appreciating they must be seen in the context of each particular capital structure. A second pitfall is to spend too much time on which covenants apply rather than focusing on the key constituents of the key terms in the financial covenant.
This course provides a detailed look at commercial aspects of financial covenants and looks under the bonnet at the critical issues that arise in practice. This course provides an in-depth look at the covenants as set out in the Loan Market Association precedent together with other covenants that might be used in practice. Reference is made to the Debtxplained loan Database which tracks key terms in the larger syndicated deals.
Participants will gain an in-depth view of which covenants should be used and why together with a detailed analysis of the constituents of the covenants and the sponsor friendly add-backs and other sponsor friendly techniques used by borrowers to manipulate the covenants.
Following the release of the LMA precedent on Real Estate investment transactions, the course now includes a section on financial covenants in real estate deals. On close examination there are some significant differences between of the interest cover ratio in real estate deals and in leveraged transactions.
The programme will appeal to practitioners involved in leverage, real estate and infrastructure, such as Lawyers, Private Equity professionals, Bankers in Lending (all departments), Corporate financiers, M&A advisors, Debt advisory and Restructuring. Accounting professionals looking to expand their knowledge of this topic will also benefit as many of the issues embrace legal /documentary considerations. The programme adopts a pan-European approach to the topic but the presenter is able to discuss issues relevant in the USA in view of his exposure to those markets.
To derive full benefit from the programme, it is essential that attendees have a basic understanding of the main / headline elements of a Profit and Loss account (Sales, EBITDA, EBIT etc) and a basic understanding of the differences between P&L /Accrual Accounting on the one hand and Cash accounting on the other. A short module summarising the key differences of these two approaches is available on request prior to the programme. It is to be emphasised that participants DO NOT require an understanding of IFRS or GAAP as the programme is designed to enable attendees to have enough basic knowledge to identify the key commercial issues.
Participants will be required to:- (a) calculate how to derive the key elements of the various covenants (b) identify some of the more problematic components in the covenants (c) calculate the various covenants and (d) explain the pros and cons of each of the covenants and why they may be appropriate for one deal but not another. The calculations are relatively simple and are designed to explain the basic principles and reinforce learning. Accounting knowledge is not required but would be helpful.
Introduction – Interaction of capital structure & financial covenants
Key financial ratios used by Lenders and typical LMA ratios
A closer look at the key elements of the ratios per LMA and market approach
Current market trends
Covenants used in Real Estate deals
Project finance / Infrastructure
What Redcliffe’s clients are saying about the course
“An excellent use of case studies & indication of recent trends”
“A good mixture of the sponsor, lender, legal & accountancy perspectives”
“The trainer is clearly very experienced with good market insight which was used to make links to the materials & content”
“Good comprehensive overview of subject”
“Strong use of practical examples to illustrate points”
“Got a view into the top end of market”
“Up to date market information with enthusiastic and knowledgeable trainer.
Clear and useful explanation as to how various components
involved in financial covenants relate to each other”
“Constant Reference to Recent Market Developments and Transactions”
“Encapsulating the Key issues likely to be faced in Negotiation with Sponsors & Borrowers”