The leveraged lending market has developed its own set of market terms and conventions, many of which do not exist outside of this market. This webinar gives a basic overview of leveraged finance credit agreements and the legal issues that arise when working on leveraged loans. Part of the webinar series: LEVERAGED FINANCE 2021 See more at https://www.financialpoise.com/webinars/

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Practical and entertaining education for
attorneys, accountants, business owners and
executives, and investors.

4. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
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5. Meet the Faculty
MODERATOR:
Chris Cahill - Sugar Felsenthal Grais & Helsinger LLP
PANELISTS:
John D. Casais – Jones Day
Jeff Gerstner – Superior Business Lending, LLC
Stacey Rosenberg – Sheppard Mullin
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6. About This Webinar – Navigating Credit Agreements
The leveraged lending market has developed its own set of market terms and conventions,
many of which do not exist outside of this market. This webinar gives a basic overview of
leveraged finance credit agreements and the legal issues that arise when working on
leveraged loans.
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7. About This Series – Leveraged Finance
Debt has always been an important part of the capital structure of many corporations and private equity
portfolio companies. At some point, most companies will need to make the decision as to whether and
how to incur debt, either in the ordinary course of business or to fund acquisitions or other transformative
transactions.
This webinar series focuses on the leveraged finance market in particular, meaning borrowings by
companies whose credit rating is (or would be if rated) below investment grade (that is, a rating below
BBB- by S&P / Baa3 by Moody’s). The leveraged finance market over time has developed its own set of
market conventions and terms that may be unfamiliar to traditional lenders.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
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8. Episodes in this Series
#1: Navigating Credit Agreements
Premiere date: 10/28/21
#2: Current Trends in Leveraged Finance
Premiere date: 11/18/21
#3: Tricks and Traps in Leveraged Finance
Premiere date: 12/16/21
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9. Episode #1
Navigating Credit Agreements
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10. Types of Credit Facilities
• Term Loans
• Delayed Draw Facilities
• Revolving Credit Facilities / Swingline facilities
• Incremental Facilities
• Bridge Facilities
• Secured vs. unsecured
• Lien ranking
• Senior vs. subordinated / mezzanine

11. “Cost plus” Nature of Loans
• Expense reimbursement and indemnity provisions
• Breakage, change in laws and tax gross up
• Fixed rate vs. floating rate
• Base rate vs. margin /spread
• LIBOR* (Eurodollar rate) vs. alternative base rate / prime rate [LIBOR is subject to
changed as of Jan. 1, 2022 or before for most deals]
• Interest rate floors

12. Structuring Considerations
• Public vs. private acquisition
• Friendly vs. hostile
• Purchase of stock and/or assets / merger / recapitalization
• Which entity owns the assets and which will incur the loans
• Where will the other debt be held
• Foreign subsidiaries
• Unrestricted subsidiaries
• Contractual / structural / lien subordination

13. Parties to Credit Agreement
• Arrangers / bookrunners (not normally a party)
• Administrative / Collateral Agent
• Documentation Agent / Syndication Agent
• Issuing Lender / Swingline Lender
• Lenders

14. Mechanical Provisions
• Obligations of lenders are several, not joint
• Special provisions for letters of credit and swingline loans
• All Lenders treated equally based on their respective share of loans and/or
commitments
• Reducing / Terminating Commitments
• Increasing Commitments: Accordion / Incremental Facilities

15. Mechanical Provisions (cont’d)
• Defaulting Lenders
• Commitment Fees vs. Facility Fees and Utilization Fees
• Promissory Notes
• Minimums, Multiples and Frequency of Borrowings

16. Types of Lenders and Different Economics
• Bank / Pro Rata Lenders
• Institutional Lenders (CLOs, prime rate / loan participation funds, insurance
companies, finance companies, other)
• Term Loan A vs. Term Loan B
• Cost of revolver commitments (and related obligations to reserve capital)

17. Interest Mechanics
• Interest Periods
• Elections to continue / convert
• Pricing / step ups / grids
• Default Interest (overdue amounts vs. all amounts, when triggered)
• LIBOR* adjustments for capital reserves
• LIBOR* illegality / succession provisions
[LIBOR is subject to change as of Jan. 1, 2022 or before for most deals]

18. Repayment / Prepayment of Loans
• Optional / voluntary prepayments (normally prepayable at any time, call protection –
soft vs. hard, non-call periods/makewholes, breakage)
• Amortization – TLB vs. TLA (order of applying prepayments to scheduled
amortization)
• Mandatory prepayments (equity sweep, debt, asset sales / recovery events, excess
cashflow, extraordinary receipts, revolver clean downs)
• Lenders’ right to reject mandatory prepayments

19. Amendment Provisions
• Required Lenders / Supermajority Lenders
• “Sacred Rights” – 100% lender approvals vs. each affected lender
• Class voting / revolver only votes
• Approvals of agents, issuing / swingline lender
• Amendments without Required Lender consent
• Defaulting Lenders
• Yank-a-bank provisions

20. Roles of Collateral Agent and Administrative Agent
• To interface between the loan parties and the secured parties and among the
secured parties
• Job is administrative and ministerial only
• Except for maintaining the loan register, the Administrative Agent is the agent for the
Lenders and not the Borrower
• Not a trustee or fiduciary
• Exculpation for liability and indemnification
• Delegation

21. Representations and Warranties
• Snapshot at a point in time
• Purposes:
• diligence
• affirming understandings on which lenders are extending credit
• ongoing monitoring

22. Representations and Warranties cont’d
• Timing: at closing and on the date of each new borrowing
• No Material Adverse Change (“MAC”) representation
• Completeness of disclosure (SEC Rule 10b-5 (anti-fraud provision)) representation
• Remedy for breach

23. Conditions Precedent
• Purpose: A checklist of what the Borrower must deliver, what actions the Borrower
must take and what circumstances must (or must not) exist for credit to be extended
• Conditions to closing vs. conditions to each borrowing
• Acquisition financings: need to ensure everything satisfied vs. certainty of funds
• SunGard (specified acquisition representations, specified representations, collateral,
defaults)

24. Covenants
Purposes:
• Preserving the value of the Borrower
• Protecting the Lenders from legal and reputational risks
• Providing information to the Lenders
• Ensuring that the Borrower complies with model / projections / business plan
• Encouraging repayment of loans

25. Covenants (cont’d)
• Types of covenant:
▪ Affirmative covenants
▪ Negative covenants
▪ Financial covenants
• Risks regarding excessive control of Borrower (bankruptcy implications / potential
lender liability issues)

26. Affirmative vs. Negative Covenants
• Affirmative Covenants
• Sometimes informational and notification covenants are treated as a separate
category of covenants
• Many affirmative covenants are “apple pie”-type covenants that require the
Borrower to do what it should already be doing
• Others are to protect and maintain the collateral and cash flow of the Borrower
and its Subsidiaries
• Negative Covenants
• More tailored for individual borrower
• No cure period

27. Financial Covenants
• Leverage Ratio
• What indebtedness included?
• EBITDA (especially addbacks)
• Coverage Ratios (fixed charges vs. interest)
• Covenant Lite / Covenant Wide or Loose
• Capex covenants (growth vs. maintenance capex, carry forwards and carry backs)

28. Financial Covenants (cont’d)
• Minimum Net Worth / Capitalized or Enterprise Value
• Specifically tailored ratios
• Annualization of financial covenants / stub periods / pro forma numbers
• No cure period (subject to equity cures)

29. Defaults and Events of Default
• Cure / grace periods
• Payment defaults
• Reps / warranties (typically no cure)
• Judgment Defaults
• Cross default / acceleration
• Change of Control
• Remedies
• Equity cures
• Impact of Sungard

30. Accordions / Incremental Facilities
• What are they? Different types of incremental facilities
• Conditions to borrowing
• MFN provisions and exceptions
• Incremental Equivalent Facilities
• Fixed “Freebie” basket / Incurrence
• Reallocation of baskets

31. Post-Financial Crisis Changes
• Need for more flexibility generally
• Amend and Extend
• Partial refinancings / exchanges
• Loan modification provisions
• Debt buyback provisions
• Credit bid provisions
• Incremental equivalent debt, including sidecar facilities
• Sometimes have ability to amend pro rata sharing / waterfall with required lender
votes (see NYDJ case)

32. About the Faculty
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33. About The Faculty
Chris Cahill - CCahill@sfgh.com
Mr. Cahill is partner at Sugar Felsenthal Grais & Helsinger LLP, in Chicago, Illinois. He guides
secured lenders, creditors, debtors, creditors’ committees, potential purchasers and others
through bankruptcy cases, out-of-court workouts, assignments for the benefit of creditors, and
receiverships. Mr. Cahill has substantial mega-case experience representing very large
debtors, and counsels and litigates on behalf of manufacturers and secured lenders in large
and middle-market cases. Mr. Cahill also publishes frequently and speaks regularly on
commercial insolvency issues. For example, he is co-author, with William H. Brown and
Lawrence R. Ahern III, of one annually-updated treatise -- The Law of Debtors and Creditors
-- and an executive editor of another -- Commercial Bankruptcy Litigation, 2d Edition
(Jonathan P. Friedland & Christopher M. Cahill eds., 2021).
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34. About The Faculty
John D. Casais- jcasais@jonesday.com
John Casais has more than two decades of experience in financing transactions and business reorganizations, representing
arrangers, underwriters, and lenders in connection with a broad array of matters in a wide range of industries. John focuses on
senior financings, with a concentration on leveraged acquisition financings, and frequently represents clients in transactions that
include a junior capital component. His clients include banks, hedge funds, and finance companies.
Financial institution clients include Bank of America Merrill Lynch, Citizens Bank, Jefferies, JPMorgan, KeyBank, and SunTrust.
His recent transactions include the representation of the arrangers and initial lenders in connection with a combined $980 million
in original and incremental senior secured credit facilities in favor of NN, a publicly traded manufacturing company, and the
representation of the arrangers, underwriters, and initial lenders in connection with $850 million in senior credit facilities and high
yield notes for AMAG Pharmaceuticals, a publicly traded pharmaceutical company. Recent restructuring transactions include the
representation of the first lien lenders to RCS Capital Corporation in connection with its reorganization under chapter 11 of the
Bankruptcy Code, including the negotiation and documentation of $150 million in debtor-in-possession (DIP) financing credit
facilities and $650 million of first-and second-lien exit credit facilities, and the representation of an ad hoc group of first lien
lenders to AFGlobal Corporation in connection with its reorganization under chapter 11, including $100 million of DIP and exit
credit facilities.
John has been recognized repeatedly by Chambers USA ("terrific lawyer...really great, imaginative deal guy") and by The Legal
500 US (recognized for commercial lending as "great" and "solution-oriented").
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35. About The Faculty
Stacey Rosenberg- SRosenberg@sheppardmullin.com
Stacey Rosenberg is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles office. Stacey
advises lenders, borrowers, and equity sponsors across a variety of debt finance transactions.
Be it senior secured credit facilities, first and second lien transactions, leveraged buy-outs or recapitalizations, workouts
and out-of-court restructurings, exit financings, cross-border deals, or secured bond transactions, she's seen and done it
all.
Stacey advises direct lenders in the middle market in connection with term loans and second lien facilities across a
variety of industries. She also counsels clients in transactions ranging from ordinary course corporate credits to bet-the-
company deals and lifeline loans.
Stacey combines her in-depth experience and transactional knowledge with a unique focus in the entertainment industry,
allowing her to provide clients with highly specialized advice in connection with credit facilities, film securitizations,
motion picture co-production and distribution arrangements, and sale transactions. In particular, she negotiates and
drafts loan documentation, motion picture production and distribution documents, joint venture documents, and sale
agreements.
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36. About The Faculty
Jeff Gerstner- jeff@superiorbusinesslending.com
Jeff is a principal at Superior Business Lending, LLC, a nationally recognized financial company
that provides all the different types of financing that small to medium-sized businesses need,
including by partnering with national lenders. Financing options include unsecured lines of
credit, equipment leasing, mezzanine debt, venture debt, cannabis and hemp business-related
financing, business acquisition financing, asset-based lending, commercial real estate loans, SBA
loans, accounts receivable financing, ground-up construction financing, and residential fix and flip
loans.
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37. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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38. About Financial Poise
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