Mandatory prepayment clauses in acquisition finance

A leveraged finance facilities agreement will normally contain a more extensive list of mandatory prepayment events than an investment grade loan agreement. The list will commonly comprise:

• • exit by the sponsor from the business;
• • receipt by the group of disposal proceeds, proceeds of insurance claims and proceeds of claims under acquisition documents; and
• • receipt of excess cashflow by the obligor group.

This guidance note discusses each of these mandatory prepayment events, how proceeds are commonly applied against the facilities, and mandatory prepayment and holding accounts.

See Mandatory prepayment clauses in acquisition finance.