This week we continue our conversation with Stephen Boyko of Proskauer. Steve is a partner in the firm’s corporate department and co-head of the private credit and finance groups. He represents one of the largest client rosters in the industry, including an array of specialty finance companies, private debt funds, and BDCs. Second of two parts – View part one
The Lead Left: You represent mostly lenders, correct? So I’m sure you’re being asked for some pretty stretchy stuff by sponsors.
Stephen Boyko: Yes. Sponsors are asking for more and more room on incremental debt, such as free and clear baskets. If the deal has closing leverage of 5.5 times, they are looking for a free and clear basket of an additional half turn to full turn of leverage (i.e. 6.5 times). Depending on the deal dynamics, this will typically settle around a half to three-quarters of a turn of additional leverage.
TLL: Where do you see total leverage ratios going?
SB: We did presentation with Lincoln International recently to discuss our data and their data for the first half of the year. It was a great event. We had about 200 lenders and sponsors in the room. Our data on leverage showed a decrease, on average, by 0.3 turns to 4.8x for the first half. Lincoln’s leverage number for the approximately 1,000 companies in their database was about the same- 4.7x. We scratched our heads and triple-checked our numbers (we always double-check). But they were correct.