Discussions around transferability rights of lenders remains an area of focus in the leveraged loan markets and in particular in the private credit arena where the “take and hold” nature of private credit loans is one perceived attraction of that asset class.
From a documentary perspective (with the detail always being in the drafting) key debate areas include:
- The events of default which if triggered should enable an immediate lender assignment right
- Silent and voting sub participations and differences in respective treatment
- Blocks on assignment to industry competitors, sponsor competitors and loan to own investors and whether these apply at all times and for each of these
- Reasonableness requirements applying to a borrower consent to assignment, deemed borrower consent provisions and the length of time silence is to infer deemed consent
- The applicability of prior notice to a borrower/sponsor of any assignment (irrespective of borrower consent not being required)
- Pre-approved new lender lists – additions and removals of names on any such list, how and often, by whom and whether removals of lenders should trigger any replacement of lender rights for the borrower.
- Disqualified lender lists - the appropriateness of those particularly in the European leveraged loan market.
All of these are points of focus and with private credit crossing increasingly into the larger cap market and also servicing both sponsor and non-sponsor backed transactions the transferability rights of private credit providers is likely to be an area of further discussion for both lenders and borrowers as the asset class and its use continues to evolve.
