Accordion Accession Agreement
With respect to mid-market transactions, we generally see provisions based on the provisions of the optional LMA credit document mechanism, which gives existing lenders the right to submit debts proposed by the borrower. At the bottom of the market, however, there can be no mechanism for accordion facilities (although see below) while we see more often, at the top of the middle market and in the case of large funds, the alternative option for credit LMA documents obtained by credit (which allows the parent company to choose, provide ease or increase liabilities). In this scenario, the safeguards mentioned below are essential. It is a matter of negotiation. Existing lenders that agree to authorize accordion capacity have two reasons: first, they want to ensure (as usual) that existing lenders are not required to participate in accordion debt; the unsyed nature of the facility is clearly important from the point of view of credit capital and regulatory capital. In borrower-friendly markets, which have emerged since about 2014, it is not uncommon for mid-sized borrowers to benefit from this flexibility, although with stricter restrictions in the lower middle classes and for uns sponsored speculative loans. The lending company is formed for use in debt financing operations (the LMA credit document) now contains an optional drafting for such a function. Summary What is an accordion function? “Accordion characteristics,” also known as “incremental entities,” have long been a common feature of large-capital capital (TLB) transactions. They are characterized in this way because they allow the overall commitments under the credit contract to be extended in order to meet the additional debts. As a general rule, all-in-yield debt on accordion debt incurred within a specified period of time after the initial financing must not exceed a certain value above the all-in-yield for the initial debts concerned. All-in-yield is expected to represent overall returns, taking into account interest margins (including potential floors), pre-feeding fees, original issue discounts and other royalties payable to lenders in general.
The negotiating points here relate to the duration of the ceiling (sunset period).
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