FI - Leveraged Loans

What’s covenants

Analogous to indenture, it’s the terms that must be abided by loan issure

Syndicated bank loan

A single form with a single set of terms but with multiple lenders, each providing a portion of the funds

what’s leveraged loan

A loan made to company whose credit rating is speculative grade

Purposes of covenants

Preservation of capital

Appropriation of excess cash flow

Control of Business Risk

Performance requirements

Reporting requirements

Four factors that affect loan’s spread

Credit quality/rating of the borrower

Size of the loans

Supply and demand of new issues

Investor risk appetites in general

What’s market flex language

Borrowers give lenders the flexibility to adjust loan terms and pricing to ensure full subscription