Private Debt Investor Quotes Amy Kennedy on Private Debt Deal Terms

For its article “Why different markets are worlds apart on deal terms,” Private Debt Investor quoted Akin Gump finance partner Amy Kennedy on her views on deal terms.

The article discusses the difference in deal documentation between the U.S. and Europe, on the one hand, and the Asia-Pacific region, on the other, as well as the post-pandemic position of strength in which borrowers and sponsors find themselves.

Kennedy notes, on deal terms, “The terms are getting pushed into the lower mid-market. They include grower baskets which are tied to performance—as the company grows, the borrower basket grows. You wouldn't have seen that in the lower mid-market 18 months ago.”

She added that there has been lender pushback on issues such as addbacks that include company performance that would have been delivered but for COVID-related disruption, noting, “Some wanted to factor COVID into the covenants, but most of the mid-market didn't give that the wriggle room. In some respects, the documentation has been tighter, and that's a positive.”

However, Kennedy acknowledges that the balance of power favors borrowers, although questions remain as to whether this is because trading performance has been propped up by temporary liquidity measures. She asked, “Do things change in late 2021 and early 2022 with a wall of restructuring? If so, the balance will likely have to shift back to the lender.”