Jefferies

Actionable Ideas for Companies and Sponsors

Issuance of Delayed-Draw Term Loans

The strength of the leveraged loan market has led to acquisitive borrowers incorporating delayed-draw features in their term loans. This allows borrowers to have pre-arranged financing for future tuck-in acquisitions without the more expensive committed financing process, while keeping their revolving credit facilities undrawn. The delayed-draw tranche is often only available for a period of time (3, 6 or even 12 months), subject to a maximum leverage level pro forma for the drawing, and requires some type of fee construct over the period of the commitment. Jefferies recently led the financing of Young Innovations to support the LBO by The Jordan Company. The first lien term loan facility consisted of $270 million of funded term loan and $68 million of delayed draw term loan. The delayed draw commitment period was for a year with a 1% ticking fee that started after 60 days.