Flexibility in Documentation Amid Economic Challenges

Current economic conditions have led financial advisors to explore flexibilities in lending documentation, particularly concerning ratio calculations and consent levels. These adjustments allow borrowers to access additional liquidity by emphasizing the importance of 'limited condition acquisitions,' which enable covenants to be tested at the time of entering definitive agreements rather than at the time of actual incurrence. This shift gives companies a way to secure funding and remain compliant with their financial covenants, even if their financial standing deteriorates afterward due to external pressures like market downturns. Advisors are identifying existing provisions that may offer borrowers a wider range of options while ensuring lenders do not need to pull out support abruptly.