Actionable Ideas for Companies and Sponsors

Issuers Using Repricings to Remove Financial Covenants

As borrowers improve their credit profile, they often look to amend their term loans, the most common amendment being to reprice their interest rate down. However, recently we have seen issuers ask for other adjustments, such as removing financial covenants, including either the total leverage covenant or the fixed charge coverage covenant. Recently we saw Cypress Semiconductor remove their fixed-charge coverage covenant, while also repricing their term loan to L+225 from L+275. In addition, the recently launched repricing for Freedom Mortgage is looking to remove its corporate debt to tangible equity covenant, while also repricing their term loan to L+475 from L+550.