This week we release another instalment of our Primary Market Education Series focusing on the SIG offering. Our founder, Sabrina Fox, analyzed the changes in the refinancing deal compared to the notes it will take out. Here's a breakdown of the key points:
1. Red Flag Review Methodology:
- A blackline comparison was conducted to identify changes quickly between the new deal and the one being refinanced.
2. Guarantor Coverage:
- Remains over 90% on all metrics with only slight differences to the prior deal, indicating no major red flags.
3. Changes in Debt Covenant:
- The Consolidated Senior Secured Net Leverage Ratio was increased by a half turn, allowing for more secured debt capacity.
- Credit facilities basket capacity was modestly raised from £75 million to £90 million and adjusted from 75% to 80% of Consolidated EBITDA.
4. Adjustment of Fixed and Grower Baskets:
- Slightly increased fixed amounts in line with increases in the grower element, which are typical for repeat issuers without a “super grower” provision.
5. Calculation Flexibility:
- New language in the Debt covenant allows more flexibility in borrowing under revolving credit facilities.
- “Applicable Calculation” can be determined at commitment entry or acquisition agreement date without retesting when the debt is borrowed.
6. Secured Debt Basket for Acquisition Finance:
- Bumped up by half a turn, aligning with current market flexibility trends.
7. Overall Assessment:
- The deal reflects standard market practices for refinancings, offering slight uplifts in certain areas and additional calculation flexibility.
We hope this analysis has provided helpful context about how to quickly conduct a Red Flag Review for a deal in the primary market. Feel free to contact us with questions or submit requests for specific deals you'd like us to review at sabrina@foxlegaltraining.com.