Negotiating term sheets with lenders
For those of you working in PE, would love to hear what terms are you looking to get a favorable treatment upon from lenders? In other words what are the more sticky points of the negotiation from both the lender and the sponsor firm (pe)’s perspective? How do you bridge the gap? If someone has a story that they can share, would love it.
This may also be helpful for future monkeys looking to learn more about a senior associate / VP role
Such a vague question its hard to answer. What do you want to know, are they more flexible on interest rate, covenants, terms, fees, amortization? If you have a real life example, share it or make one up with some specific questions.
I'll throw out a few points that might be relevant here
-particular EBITDA addbacks you want to see included, run-rate savings lookforward period, % cap of EBITDA -Permitted investments and restricted payments baskets -Maximum capex covenants (if you need to grow business will want to avoid this) -springing fccr and leverage tests (when under 10-15% rcf availability) -excess cash flow recapture -optional prepayments (preferrably applied to the upcoming payments, rather than the payments on the back end of the amort schedule)
Need to explain to them from a business perspective as to why you feel their terms are restrictive and how they should be able to get comfortable with your proposed terms. Your legal team should be able to do this.
my advice would be to hire an debt capital advisor and then pay their fees with the loan proceeds. you're entering into a binding legal doc, you want representation. whoever lends you this money is going to have a real legal team.
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