Syndicated loan market trends: Key insights from the NYC Commercial Finance Meeting

Financial services professionals recently gathered at the NYC Commercial Finance Meeting 2025 to discuss evolving trends in the United States corporate loan market.

Organized by the American Bar Association, the event primarily focused on intercreditor agreement negotiations and the latest developments in loan documentation.

DLA Piper’s US Finance team provides key takeaways below.

Intercreditor agreements: Precision in structure and language

Panelists at the meeting emphasized that understanding the business deal at hand is paramount when negotiating intercreditor agreements.

Key considerations include:

• Subordination types: Clarify whether the deal involves lien subordination, payment subordination, or both. Determine if payment conditions apply universally or selectively.
  
  
• Blockage periods: Define the scope and duration clearly to avoid ambiguity.
  
  
• Split lien structures:

• Identify asset-based lending vs. term priority collateral based on the borrower’s business operations.
  
  
• Address contingencies such as the payoff of the term loan and the treatment of equity cure proceeds.

• Remedies standstill: Specify the business deal around mechanics to ensure efficiency and accuracy in drafting.

Drafting nuances

• Subordination can be subtly embedded in waterfall provisions. Broad language can benefit senior lenders, but also risks unintended subordination. To avoid capturing the seller’s rollover equity or payments pursuant to a transaction support agreement, lenders are encouraged to narrowly draft the subordination of a seller note.
  
  
• Lenders are encouraged to scrutinize the language around payment of fees and expenses for interest disguised as fees (eg, original issue discount).
  
  
• When permitting scheduled payments, specific instruments can be referenced to avoid confusion.
  
  
• If payment conditions are tied to financial covenants or availability tests, safeguards against manipulation (eg, measuring availability on both an average basis and day-of) are encouraged.
  
  
• Senior lenders are encouraged to clarify that debtor-in-possession (DIP) roll-ups do not count as prepayments reducing the DIP cap.
  
  
• Waterfall and lien release provisions impact outcomes when a lender enforces remedies.

Integration with credit agreements

• Drafters are encouraged to ensure consistency in defined terms and mandatory prepayment provisions across documents.
  
  
• If a term is set out in the credit agreement but not the intercreditor agreement (eg, debt caps), then a breach of that term triggers a borrower default under the credit agreement. However, the lenders do not have privity against one another.

Loan documentation: Emerging risks

EBITDA addbacks

• Adjustments aligned with Regulation S-X, Article 11 can be drafted carefully so as not to override capped cost-savings addbacks.
  
  
• Synergy addbacks can be drafted narrowly to avoid unintentionally including revenue synergies.
  
  
• Tariff addbacks are emerging but remain uncommon.

Paid-in-kind (PIK) interest

• PIK interest is increasingly prevalent, especially in holdco loans or seasonal businesses.
  
  
• PIK interest can distort leverage ratios and raise concerns for rating agencies.
  
  
• Lenders should read sacred rights provisions carefully to ensure that required lenders cannot change the loan from cash pay to PIK.
  
  
• PIK interest is less suitable for syndicated loans, as PIK loans are less liquid.

Emerging trends

• Covenant dilution: Looser covenants are becoming more frequent.
  
  
• Limited conditionality: Limited conditionality is more commonly being applied to revolver draws, in addition to incremental facilities.
  
  
• “Lawyer-on-lawyer violence”: Expense reimbursement clauses may exclude specific law firms and vendors, akin to a disqualified lender list.
  
  
• Anti-cooperation agreements: Sponsors and borrowers are asking for these provisions, which give the borrower more control over liability management transactions.

Conclusion

The NYC Commercial Finance Meeting 2025 highlighted the complexity and nuance in syndicated loan documentation and intercreditor negotiations. As market practices evolve, precision in drafting and a deep understanding of the borrower’s business remain key in protecting lender interests.

For more information, please contact the author.