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7 March 20222 minute read

New Year: New Terms for the Mid-Market?

Trends from the European large-cap leveraged debt space and their emergence in the UK and European mid-market

Following a path well-trodden, flexible sponsor terms first conceived in the US debt markets continue to find their way into large-cap European leveraged loan documents, before ultimately emerging in some shape or form in the UK and European mid-market.

Documentary convergence is by no means a new concept in the large and mid-sized European markets: the gradual infiltration of terms more traditionally associated with US-style TLBs or HYBs is a phenomenon with which investors in both the large-cap and mid-market loan spaces are extremely familiar.

For now, the documentary terms seen in the mid-market remain significantly more conservative than at the larger end of the loans spectrum. However, concepts that have become entrenched in the latter space have a habit of appearing, and often ultimately becoming accepted, at the smaller end of the debt playing field. Lenders and their legal advisors operating in the mid-market have therefore learned to keep one eye trained on the European large-cap horizon, for advance warning of the terms evolving there that may, sooner or later, appear in their own loan documentation.

In the first our Market Trends reports, we take a look at some trends from the European large-cap leverage space, including:

  • controls around further debt incurrence;
  • basket flexibility and leakage; and
  • permitted adjustments to EBITDA,

and consider the potential for these trends to take root in the mid-market over the coming year.