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Navigating the Mixed Terrain of Mid-Market Documentation with Macfarlanes
Dec 18, 2024
Kirstie Hutchinson and Adam Caines, private capital partners at Macfarlanes, dive into the evolving landscape of mid-market loan documentation in Europe. They discuss how relaxed documentation practices are shifting the balance in favor of borrowers, and highlight new clauses that may raise concerns among lenders. The conversation also touches on the impact of external events like COVID-19 on loan structures, emphasizing the importance of strong relationships between borrowers and lenders in navigating this complex terrain.
30:40
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Quick takeaways
- The gradual loosening of documentation in Europe's mid-market has shifted negotiation power towards borrowers, impacting lender protections significantly.
- Private credit lenders are increasingly adopting a relationship-focused approach, enabling flexibility in terms while balancing risk mitigation strategies for capital protection.
Deep dives
The Evolving Landscape of Private Credit Documentation
The current state of documentation in the European private credit market is characterized by a gradual loosening of terms that has emerged from historical practices. Traditionally, mid-market loan agreements were based on stringent LMA templates that provided solid protections for lenders. However, with the rise of private credit and subsequent changes in negotiating power, there has been a notable shift towards more borrower-friendly documentation. This environment encourages borrowers with strong credit profiles and solid sponsorship to secure favorable terms, reflecting the dynamic interactions between lender protections and the operational freedoms negotiated in loan agreements.
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