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: What do you see as the leading edge of structures and documentation?

Stephen Boyko: Many are looking for flexibility for growth for acquisitions and further debt incurrence. For the top tier sponsors, they want to relever back to the original leverage. It’s not like the old days when leverage came down over time. For top-tier sponsors, those days are gone.

Secondly, sponsors are very focused on financial covenants. They are writing them to include lots of flexibility. For example, we see a number of additional add-backs allowing the company to do things over the next one or two years. Also, some top-tier sponsors are trying to eliminate or reduce the number of step-downs in leverage. In those deals, leverage goes down two steps, maybe three or four, then that’s it. That’s different than what lenders have been accustomed to in the past.  Sponsors each have their wish list, so everyone’s different.