As the leveraged lending market remained strong in the first quarter of 2018, the market saw increasingly favorable terms for financial sponsors and borrowers. A very positive supply/demand balance, driven in part by strong CLO origination and improved retail inflow, brought post credit-crisis lows for leveraged loan pricing margins, an increased number of cov-lite financings and improved terms generally.
One such area of improvement is for delayed draw term loan (“DDTL”) tranches. This led to DDTLs becoming much more popular with borrowers in the 1Q of 2018, including recent deals for Traeger Grills, Dohmen Life Sciences Services, OSG Billing and Tekni-Plex.
DDTL terms for ticking fees, upfront fees and the availability period have improved as follows:
As we enter the 2Q of 2018, in light of this hot market for DDTLs, sponsors and borrowers are increasingly opting to secure DDTLs to fund future acquisitions and to obtain a dependable source of liquidity for the near term.
Sources: LCD News, Covenant Review (April 2018 edition) & Goldsheets Weekly