Amendment Of Credit Agreements

Delaying or avoiding cash interest and amortization payments is a convenient way to save cash, but can be difficult to achieve. In most credit contracts, the conversion of interest into cash into PIK interest and the suspension or delay of scheduled amortization repayments trigger a consultation with lenders. Incentives to convince lenders to accept PIK interest and/or suspend repayments often include an increase in the range for all PIK interest-subject loans (often between 100 and 150 basis points) and/or fees (sometimes structured as PIK or exit fees). However, in the case of large-scale loans, the composition of the group of lenders may have a greater impact on the extent to which interest payments can be converted to PIK. This is due to the fact that some non-bank lenders may be subject to restrictions on their founding documents that prevent them from accepting piK interest. The most common approach in the amendments we have seen so far has been the abandonment of compliance with financial pacts between the first quarter of 2020 and the fourth quarter of 2020 included. The exact period of non-fiscal commitment depends on the borrower`s circumstances, so it can begin in the second quarter of 2020 and not end until after the first quarter of 2021. The borrower has the option of prematurely terminating the period for waiving financial agreements if it is in accordance with the financial pact on the basis of EBITDA calculated in accordance with the corresponding credit agreement (or after the effect of the applicable EBITDA adjustments after the end of the notice period for financial agreements in more borrower-friendly changes). It is interesting to note that we have recently seen a change that includes a bond make-up scheme in incremental facilities that apply for the first two years (and probably due to the borrower`s difficult financial situation if the borrower is the subject of bankruptcy proceedings or if the obligations arising from the credit contract are accelerated). Changes to hardware`s adverse effect clauses. Some of the amendments we have seen contain excerpts from the definition of «substantial negative effects» on the impact of COVID-19 on the borrower`s activity.

With regard to draws under revolving credit facilities, some amendments specify that the effects of COVID-19 are not taken into account when determining the correctness of the reduction in representations. In some changes, instead of or in addition to the granting of financial obligations for a given period, lenders agree to reset the financial pact by increasing the level of financial pacts to account for the likely decline in EBITDA during the financial quarters covered by COVID-19. Up to one to two years after the expiry of the period for waiving financial pacts, the borrower will benefit from the benefits of an enticed amount of the financial alliance. Below are some trends regarding changes to credit contracts by U.S. borrowers in the wake of the cosvid-19 crisis. In particular, we discuss financial relief, changes in EBITDA calculations and reporting obligations, certain liquidity improvement strategies, and other changes and reflections. The agreement or any other senior loan document, and does not modify, modify, modify or affect any of the terms, conditions, commitments, agreements or agreements of the credit agreement or any other principal loan document and cannot continue to do so efficiently and effectively. None of these terms is considered eligible for authorization or waiver, amendment, amendment or other modification of any of the terms, obligations, agreements or agreements contained in the credit agreement or other principal loan document in similar or other circumstances.