Cash Flow Lending

In cash flow financing where the lender’s primary source of repayment is the cash flow stream that a borrower is expected to generate over the life of the loan. While the concept is straightforward, the terms of the loan and the underlying cash stream may be quite complex. The lawyers of Troutman Sanders’ commercial lending practice have the in-depth legal, financial and industry experience required to guide clients through the negotiation and successful closing of these important deals.

Cash flow loans can take many shapes and forms and can be secured or unsecured, revolving or term, senior or subordinated, or for acquisitions or working capital. Cash flow financings are characterized by affirmative and negative covenants designed to protect the going-concern nature of the borrower’s business, based upon the borrower’s earnings before interest, taxes, depreciation and amortization (EBITDA) and debt service coverage. Some of these borrowers may not have significant operating assets but are able to generate significant cash flows. In today’s globalized economy, a significant portion of a borrower’s EBITDA may be generated by subsidiaries outside the U.S. which can create cross-border issues and risk for lenders.

Lawyers in our finance section routinely represent banks, other financial institutions and borrowers in cash flow financings. As a member of the Loan Syndications and Trading Association (LSTA), the firm has access to cutting-edge forms and current market information regarding cash flow loans. In addition, the breadth of our members’ activity in cash flow lending keeps us abreast of market norms and new developments for documenting cash flow loans and for properly addressing cross-border issues that can arise with multinational borrowers. Our extensive experience also allows our members to advise clients on the practical effects of provisions in the loan documentation, and to identify which provisions are essential and where flexibility can be shown.

Representative Experience

  • Lead counsel to a network, communications and IT services provider in connection with a $175 million revolving credit facility.
  • Lead counsel to a global telecommunications company in connection with a $2.8 billion secured acquisition financing..
  • Lead counsel to a national snack food company in connection with a $1.13 billion acquisition financing.
  • Lead counsel to a multinational pulp, paper and forest products manufacturer on a $600 million asset-based credit agreement.
  • Lead counsel to a multinational producer of premium specialty papers and resin-based products in connection with a $1 billion acquisition financing.
  • Lead counsel to a privately-held fast food restaurant company in connection with a $350 million syndicated credit facility.
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