LPC - Lending Lowdown Series Episode 30 | Understanding Debt Portability in Loan Agreements
6 snips
Mar 26, 2025 Arek Maczka, a Partner at Ropes & Gray, specializes in navigating leveraged financings for PE sponsors. He discusses the concept of debt portability, emphasizing its role in facilitating smoother transitions during refinancing. Arek outlines key terms like maximum leverage and identity limitations for sponsors while exploring how market changes have made portability more common. He also shares insights on its future relevance and the potential challenges lenders and borrowers may face, hinting that portable capital structures are gaining traction in today's financial landscape.
AI Snips
Chapters
Transcript
Episode notes
Debt Portability Explained
- Debt portability allows a company to be sold without triggering a change-of-control clause.
- This lets original sponsors exit without lender recourse, as lenders underwrite both the sponsor and the borrower's financials.
Benefits of Portability
- Portability benefits borrowers by reducing origination costs when selling, as new financing isn't needed.
- It streamlines the sale process, avoiding lender diligence and maintaining confidentiality.
Portability Timing and Optionality
- Portability is typically added during refinancing, not initial origination, and it's optional for borrowers.
- Borrowers can prepay the facility if they choose not to port it during an acquisition.