Volatile credit markets and guarded banks have made securing term loan C (TLC) debt attractive for borrowers who heavily rely on letters of credit to trade but either have low credit ratings or otherwise have difficulty accessing large enough revolving facilities to support the high amount of letters of credit needed.

HEADLINES

1. Introduction 

During the COVID-19 crisis, many companies are facing unexpected financial distress, and taking steps to stabilise their business and bolster their finances.

Many directors will not have experienced these issues before, and should be aware of how their duties are impacted when the company is in financial distress.

This guide has been prepared on the basis of Hong Kong law principles. Many of the principles will also be applicable to other common law jurisdictions.

How are companies responding to the current crisis?

Introduction

Over the last few years, the European leveraged finance market has seen rapid growth of senior secured high yield notes (“SSN”) and senior secured covenant-lite term loan  B (“TLB”) financings. A common feature of both SSNs and TLBs (together “Senior Secured Debt”) is that their terms typically permit the incurrence of senior unsecured debt by a borrower and its restricted subsidiaries (a “Credit Group”) subject to either satisfaction of a  financial ratio or through various permitted debt baskets.