This webinar discusses recent trends in leveraged finance terms and practices. It covers changes to leveraged finance documents like successor LIBOR provisions and beneficial ownership requirements. It also discusses expansions in the ability to incur additional debt, designate unrestricted subsidiaries, and conduct asset sales. Finally, it explores evolving standards around financial covenants, acquisition conditionality, and the potential for a more portable capital structure. The panelists are experts on commercial finance deals and leveraged acquisitions representing major banks and borrowers.

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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:
Jeff Gerstner – Superior Business Lending, LLC
James Snyder – Sidley Austin LLP
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6. About This Webinar – Current Trends in Leveraged
Finance
This webinar discusses some of the latest trends and developments in leveraged finance
terms and practices and the extent to which some of these have gained market acceptance.
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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 #2
Current Trends in Leveraged Finance
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10. Recent Changes to Leveraged Finance Documents
• Successor LIBOR provisions and related agent protections
• LLC/LP divisions
• FINCen requirements regarding beneficial ownership
• Tax changes
• GAAP lease changes
• Others

11. Changes to Collateral / Guarantee Package
• Release of guarantees in corporate reorganizations
• Changes to deemed dividend regulations
• Treatment of excluded collateral as not subject to secured leverage ratios / lien
covenant restrictions

12. Flexibility With Respect to Incremental Facilities
• Inside maturing debt
• Bridge facilities
• MFN and related exceptions
• Free and clear growers
• Increase free and clear with yank-a-bank amounts
• Reallocation from free and clear to ratio basket
• Types of debt that can be incurred under the accordion and related incurrence tests
(e.g., interest coverage test)
• When can the terms of the new debt be more favorable than the existing debt?

13. Ability to Incur Additional Debt
• Ability to incur debt at non-guarantor subsidiaries
• Ability to incur other structurally senior debt
• Ability to convert RP capacity into debt capacity
• Up to 200% contribution debt
• Other

14. Unrestricted Subsidiaries
• Limits on investments in non-Loan Parties (or not)
• J-Crew
• “Trap-Doors- allowing non-loan parties to invest unlimited amounts in unrestricted
subsidiaries with the proceeds of investments from Loan Parties
• “Black Hole” – a trap door-type provision with no limits on investments by Loan
Parties in non-Loan Parties
• “J-Crew blockers” – what are they and do they work?
• Other blockers on investments – leverage, default, etc. (incurrence vs. available
amount baskets)?
• Limits on ability to designate and redesignate unrestricted subsidiaries

15. Mandatory and Voluntary Payments
• Application to scheduled amortization
• ECF stepdowns
• Reductions in ECF calculation vs. ECF payment (i.e., dollar for dollar reduction for
voluntary prepayments, RPs, junior debt payments and capex)
• Asset sale stepdowns
• Retained asset sale proceeds increase available amount basket

16. Asset Sale Covenants
• Movement to high yield-type standards
• 365-day reinvestment with 180 day extension
• Broad exceptions to “Asset Sale” definition
• Uncapped amount of permitted asset sales
• 75% cash, but with broad definition of “cash” to include big designated cash
equivalent basket
• Broad definition of “Net Cash Proceeds” or equivalent
• Large de minimis threshold

17. EBITDA
• Synergies and cost savings caps (or not) – calculated pre- or post-adjustment
• Time for synergies and cost savings (time for realization of cost savings/synergies or
implementation of event giving rise to cost savings/synergies)
• Extraordinary, unusual and non-recurring
• Other unusual adjustments
• EBITDA growers
• Available Amount
• Incurrence and financial maintenance tests

18. Change of Control – Portable Capital Structure
• Leverage / ratings tests
• Minimum equity
• Minimum fund size or capitalization
• KYC, PATRIOT Act, OFAC?
• Other conditions
• Possible portability through definition of “Permitted Holders”
• RPs permitted in connection with portable CoC?

19. Permitted Change of Control (example definition
from BJ’s Wholesale Club, Inc. Credit Agreement)
“Permitted Change of Control” means any transaction or series of related transactions which otherwise may constitute a
Change of Control in which a New Sponsor acquires, either directly or indirectly, through one or more holding companies,
Beneficial Ownership of Equity Interests representing 50% or more of the aggregate ordinary voting power in Holdings or
conveying the right to nominate a majority of the board of directors of Holdings (whether directly or indirectly through the right to
direct the vote of such Equity Interests) and the following additional conditions are met:
(a) the Borrower shall be in compliance, on a Pro Forma Basis after giving effect to such transactions or series of related
transactions (including any Indebtedness assumed or permitted to exist or incurred, issued or otherwise obtained in connection
therewith), with (x) a Total Net Leverage Ratio of not greater than 6.10:1.00 and (y) a Senior Secured First Lien Net Leverage
Ratio of not greater than 4.80:1.00;
(b) the New Sponsor shall have made, or substantially concurrently therewith, shall make, cash equity contributions
directly or indirectly to the New Sponsor’s acquisition vehicle (which shall be used to consummate a Permitted Change of Control)
on or prior to the Permitted Change of Control Effective Date in an aggregate amount equal to, when combined with the fair
market value of any Equity Interests of any of the management and other existing equity holders of Holdings (or any direct or
indirect parent company of Holdings) and its Subsidiaries rolled over or invested in connection with such Permitted Change of
Control (such cash equity contributed by the New Sponsor, taken together with the fair market value of any Equity Interests rolled
over or invested in connection with the Permitted Change of Control, the “Permitted Change of Control Equity Capitalization”), at
least 25.0% of the sum of (i) Consolidated Total Net Debt and (ii) the Permitted Change of Control Equity Capitalization;

20. Permitted Change of Control (cont’d)
(c) (i) at least 15 Business Days prior to the Permitted Change of Control Effective Date, the Borrower shall have delivered
notice to the Administrative Agent of such Permitted Change of Control and of the identity of the New Sponsor and (ii) not later
than two (2) Business Days prior to the Permitted Change of Control Effective Date, the New Sponsor shall have provided all
customary information about its acquisition vehicle that shall have been reasonably requested by the Administrative Agent in
writing at least ten (10) Business Days prior to the Permitted Change of Control Effective Date and that the Administrative Agent
reasonably determines is required by United States regulatory authorities under applicable “know your customer” and anti-money
laundering rules and regulations, including the PATRIOT Act (and, upon any request made by a Lender to the Administrative
Agent, the Administrative Agent will provide the Lenders with all such information made available to it);
(d) on the Permitted Change of Control Effective Date, the Administrative Agent shall have received an officer’s certificate
from the Borrower stating that the conditions described in clauses (a) through (b) above and the definition of “New Sponsor” have
been satisfied; and
(e) after giving effect to a Permitted Change of Control, New Sponsor shall have a majority of the voting power for the
election of directors, managers or other governing board of the Borrower.
For the avoidance of doubt and notwithstanding anything to the contrary herein, only one Permitted Change of Control shall
be permitted to be consummated under this Agreement and any Permitted Change of Control must be consummated prior to the
date that is 24 months after the Closing Date.
“New Sponsor” means any entity or group of entities with committed capital or assets under management in excess of
$1,000,000,000 or otherwise reasonably acceptable to the Required Lenders, in either case, together with any co-investors.

21. Permitted Change of Control (cont’d)
Other provisions that might be impacted by a portable capital structure include:
• “Affiliated Lender” and “Permitted Holders”/ “Sponsors” definitions
• Consolidated Net Income / EBITDA addbacks for Permitted CoC
• Limited Condition Acquisition / Pro Forma adjustments
• Management Agreement
• Repricing Event (soft call protection)
• Mergers / Restricted Payments in connection with a Permitted CoC
• Transactions with Affiliates
• Cross-Defaults related to Permitted CoC

22. Financial Covenants
• Covenant lite vs. covenant wide
• Cushions
• Springing levels
• LC carveout from springing
• Equity cures and overcures
• Double dip only restricted in quarter of cure (if proceeds used to pay down debt)

23. Builder Baskets/Available Amount
• Starter basket
• Builder basket and how calculated (e.g., retained EBITDA vs. add backs to CNI)
• Different blockers depending on which element of builder basket used
• Retained asset sale proceeds as builder
• Build using debt buybacks at par

24. Amendment Provisions
• Pro rata sharing and waterfall provisions
• NYDJ case
• Coercive amendments
• Advance forbearances

25. Prepayment of Junior Debt
• No longer applies to unsecured debt
• Doesn’t normally apply to debt secured by excluded assets
• May not even apply to junior secured debt in some deals
• Discuss implications
• Related Issue – amendment of Junior Debt documents

26. Reporting Requirements
• No monthly financials
• No management discussion and analysis (MD&A) for quarterly financials
• No lender meetings and sometimes no lender calls (or annual calls, if lucky)
• Going concern carveout exceptions

27. Limited Condition Transactions
• Effectively pre-agreeing to SunGard conditionality for future acquisitions under
existing credit agreement without knowing anything about the new target
• Discuss conditionality (representations, collateral and EODs)
• Applicability to transactions other than permitted acquisitions (e.g., all investments,
restricted payments and junior debt payments)

28. Layering of Debt
• 1.5 lien (1.25, 1.125, etc.) lien debt
• Last out debt / superpriority debt
• Debt secured by non-Collateral assets
• Definitions of incurrent tests (e.g., secured leveraged tests only based on debt
secured by collateral, first lien leverage tests that only apply if pari passu secured
debt is not subordinated in right of payment, etc.)
• Anti-layering provisions (layering of liens vs. payment subordination) – applicability
to unitranche or last out debt

29. Future of Loan Market
• Loosening of Covenants
• Possible Pushback
• Catalysts for Turn in Debt Market

30. Other Trends
• Higher interest rates
• Inflationary pressures
• Impact of Direct Lenders on Loan Market
• Impact of Third Party Reviewers (e.g., Xtract, Covenant Review, etc.)
• Loan Recovery Rates
• Government Oversight

31. About the Faculty
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32. 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 of Willam H. Brown, Lawrence
Ahern III & Christopher M. Cahill, The Law of Debtors and Creditors (2022), and Executive
Editor of Jonathan P. Friedland, et al. Commercial Bankruptcy Litigation, 2d Edition (2022).
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33. About The Faculty
Jeff Gerstner- jeff@superiorbusinesslending.com
Jeff Gerstner is a former fixed-income trader that formed Superior Business Lending (SBL) to help those
businesses access financing that cannot walk in their bank and obtain the financing they need. Some of
the types of deals SBL works on are:
--Unsecured Lines of Credit
--Equipment Leasing
--Mezzanine Debt
--Venture Debt
--Cannabis and Hemp business-related financing
--Debt Restructuring
--Business Acquisition Financing
--Asset-Based Lending
--Commercial Real Estate Loans (Bridge and Permanent)
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34. About The Faculty
James A. Snyder- james.snyder@sidley.com
Jamie Snyder focuses his practice on commercial finance deals, including corporate lending transactions, leveraged
acquisitions, specialty financings and other debt investments.
He represents money-center banks and non-bank lenders in connection with senior secured and unsecured credit
facilities, unitranche financings, first lien and second lien transactions, mezzanine and subordinated financings, and cash
flow as well as asset based transactions. He also has experience advising private equity firms and corporate borrowers
in debt financings and general corporate matters. In addition, Jamie has extensive experience representing lenders and
borrowers in connection with debtor-in-possession financings, bankruptcy exit facilities, workouts and restructurings. His
practice covers a broad range of deal sizes, from bi-lateral domestic financings for middle market companies, to broadly-
syndicated credit facilities for publicly traded companies with extensive cross-border operations.
Jamie’s representative clients include commercial and investment banks, asset managers, finance companies and
private equity firms, as well as public and private corporations. Jamie has been recognized in the 2014–2021 editions of
Chambers USA for Banking & Finance and in the 2018–2019 editions of Leading Lawyers.
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35. 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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36. About Financial Poise
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