debt documentation loan or credit Agreements are entered into between a p funds acquisition SPV and a single or many debt providers for an lbo these documents set out the terms and conditions governing the debt issuance process the economic rights of the lender and the performance requirements of the target company during the loan term loan agreements will include amount and term of the loan This will include the amount of capital length the interest rate the fees associated with the loan often a single digit percentage and listed in a separate feel letter the amortization or repayment schedule for the principal and any collateral provided as security against the loan normally listed in detail in a security agreement.

Representations and warranties which provide the lender with the mechanism to terminate the loan agreement in the event of a breach post signing. These are normally aligned with the Reps and warranties in the sale and purchase agreement known as the SBA and may cover items such as the organization being duly incorporated or ensuring that the financial statements are correct. They focus on describing the target company using facts legal standing and financial information as at the time of the deal and the accuracy of information provided by the vendors to describe the target borrower reps and warranties are often reasserted or rechecked at specific dates during the loans term to reconfirm the state of the operating company and the accuracy of information shared.

Conditions precedent CPS. These are specific events or states of Affairs that must be satisfied or waived for the transaction to proceed. In other words. These are conditions that the buyer requires for the acquisition to take place and can fall into two categories documentary CPS and event CPS. These are closely linked to the agreed CPS in the SBA to reduce uncertainty documentary CPS are conditions to receive information and may include delivery of due diligence reports legal opinions latest Financial reports audits agreed upon base case financial model and ultimately an executed Spa events CPS are conditions that certain actions must take place before the acquisition takes place and include for example, the accuracy of reps and warranties and the absence of any default.

conditions subsequent these set out details of outstanding conditions at closing and the date by which the borrower must satisfy them often 90 days in some instances where a borrower does not satisfy a condition precedent in time for drawdown of funds. The lender may still give the loan if the borrower agrees to satisfy the condition by a specific future date failure to fulfill a condition within the set time period will usually trigger an event of default other examples could include the filing of certain regulatory documents or the appointment of new auditors.

Covenants are the key monitoring mechanism following lending and are divided into financial and non-financial Covenants Financial covenants. Define certain thresholds of operating performance within which the target company must perform the failure of doing so results in a breach of contract common Financial covenants include interest coverage and debt to equity ratios Financial covenants are either maintenance keeping ratios within agreed levels or incurrence such as not taking on further Financial liability or expenses. Non-financial covenants can be divided into General non-operating such as confidentiality or access to information and business information required to monitor the Target and to check that the target company is operated according to legal and Commercial regulations these range from minimal known as Covenant light to Major by way of example a covenant light SBA might have only a few Financial covenants. Where is a more extensive? One may have many more ratios that the company needs to satisfy covenants may be more or less comprehensive based on different factors such as A bank's internal requirements the state of the lending market and macro conditions and the financial health of the Target business breach of covenants would result in an event of default.

events of default these include a long list of occurrences or circumstances that provide a lender with the right but not the obligation to accelerate loan repayment or require immediate repayment of the loan common default events include failure of the borrower to meet interest or principle payments breach of a financial Covenant or breach of a representation or warranty default can also be triggered due to an event of default in another loan agreement, which is referred to as a cross default.

Enter creditor agreements govern the various ranking and rights among debt providers in an lbo. This agreement principally serves to protect the rights of senior lenders by clearly defining the rights of each debt provider in the event of default in addition to debt providers all counterparties to the loan agreements of an lbo including acquisition spvs the target company as well as Equity providers may be party to the intercreditor agreement integrated agreements only come into effect upon completion of the spa the key provisions of an increditor agreement are payment subordination, which governs which lender gets paid back first lean subordination dealing with which lender has less claims to certain assets stand still periods where more Junior lenders have to wait before claiming collateral in the event of default payment blockage or the restriction for borrower to pay a more Junior lender turnover Provisions, which make sure seniority of lenders is respected by the borrower and Senior debt limit.

Which is the maximum amount of debt that can be considered more senior than that of the remaining debt holders.