Winston & Strawn Loan and CLO Market Update June 10, 2015 © 2015 Winston & Strawn LLP Today’s Speakers Timothy J. Dable Corporate Partner Chicago +1 (312) 558-6369 [email protected] Jai S. Khanna Corporate Partner Chicago +1 (312) 558-6357 [email protected] Felton E. Parrish Corporate Partner Charlotte +1 (704) 350-7820 [email protected] Kevin M. Ryan Corporate Partner Chicago +1 (312) 558-7482 [email protected] © 2015 Winston & Strawn LLP Michael T. Mullins Corporate Partner Chicago +1 (312) 558-7568 [email protected] James A. Snyder Corporate Partner Chicago +1 (312) 558-5271 [email protected] 2 Agenda State of the CLO Market Cash Flow Loan Update Asset Based Loan Update LSTA Update Bankruptcy Update © 2015 Winston & Strawn LLP 3 State of the CLO Market © 2015 Winston & Strawn LLP CLO Market Update • Recent History • Current Market Trends and Outlook • Obstacles: Past and Present • Volcker Rule • Risk Retention • Loan Supply / Pricing Arbitrage © 2015 Winston & Strawn LLP 5 CLO Market Update • European Risk Retention • What are managers doing now? • “Hold periods” for retention holders/originator • US Risk Retention • What are managers doing now? • Refinancings • Majority Owned Affiliate • Leverage • Voting rights • Making deals work for both US and EU risk retention © 2015 Winston & Strawn LLP 6 Loan Market Update © 2015 Winston & Strawn LLP Cash Flow © 2015 Winston & Strawn LLP 8 Overview • Thin deal flow • Reasons? • Impact • Leveraged lending guidance • Large cap space • Mid-market space © 2015 Winston & Strawn LLP 9 Impact on Documentation • Increased borrower sway over process generally • Further loosening of deal terms • Continued evolution of "sponsor technology" © 2015 Winston & Strawn LLP 10 Players in the Market • Existing names expanding, including into new markets and considering new industries • Lots of new names and platforms in the MM space • Questions surrounding pending transactions © 2015 Winston & Strawn LLP 11 Alternative Structures and Approaches • Interest in seeking to gain any toehold to increase market share • First Out / Last Out and Unitranche • First Lien / Second Lien © 2015 Winston & Strawn LLP 12 Asset Based © 2015 Winston & Strawn LLP General Overview • Similar issues surrounding deal flow as in Cash Flow space • More frequent use of precedent documents or provisions • Sponsor desire to match existing terms of portfolio © 2015 Winston & Strawn LLP 14 ABL Deal Specific Terms • Reserves – creeping past general permitted discretion • Financial Covenant/Equity Cure – increased frequency of cure rights • Cash Dominion Spring – extension of trigger event • Payment Conditions – creation of sub categories and combinations within standard requirements © 2015 Winston & Strawn LLP 15 Alternate Approaches to Enhanced Availability • Eligible equipment or fixed asset components • Stretch portion on eligible accounts and/or eligible inventory • Eligible accounts of foreign subsidiaries © 2015 Winston & Strawn LLP 16 LSTA Update © 2015 Winston & Strawn LLP LSTA Update • Model Credit Agreement Provisions • Disqualified Lender Lists • LSTA approach generally followed in marketplace • But with case-by-case negotiated deviations • DQ list only provided to Agent not lenders • Assignments to DQed lenders null and void • Expansion of borrower ability to update list • LSTA Market Advisory– deviations upset delicate balance © 2015 Winston & Strawn LLP 18 Bankruptcy Update © 2015 Winston & Strawn LLP Bankruptcy Update • In re MPM Silicones, LLC – the worst of all worlds: • Claim for make-whole payment denied; • Plan confirmed that provided for below market interest rate to secured lenders; and, • Claims against second lienholders for breach of intercreditor agreement dismissed. • Unitranche Issues: • In RadioShack bankruptcy, court interpreted and enforced Agreement Among Lenders (AAL). • There was no express ruling as to enforceability of AAL in bankruptcy, but decision does provide some comfort. © 2015 Winston & Strawn LLP 20 Questions? © 2015 Winston & Strawn LLP 21 Speakers Timothy J. Dable Corporate Partner Chicago +1 (312) 558-6369 [email protected] Jai S. Khanna Corporate Partner Chicago +1 (312) 558-6357 [email protected] Michael T. Mullins Corporate Partner Chicago +1 (312) 558-7568 [email protected] Felton E. Parrish Corporate Partner Charlotte +1 (704) 350-7820 [email protected] Kevin M. Ryan Corporate Partner Chicago +1 (312) 558-7482 [email protected] James A. Snyder Corporate Partner Chicago +1 (312) 558-5271 [email protected] © 2015 Winston & Strawn LLP 22 Thank You © 2015 Winston & Strawn LLP
© Copyright 2024