Lead Left Interview – Wayne McKinzie (Part 2)

This week we continue our conversation with Wayne McKinzie, a partner at Moore & Van Allen PLLC. Named in Best Lawyers in America for Banking and Finance Law, Wayne represents investors in various senior and mezzanine financing transactions and investments. Moore & Van Allen, based in Charlotte, is one of the largest law firms in the Southeast, employing nearly 300 attorneys, with approximately 80 attorneys on the Financial Services team. Second of two parts – View part one

The Lead Left: Is there a distinction with middle market deals?

Wayne McKinzie: We still see set dollar amounts in lower middle market deals but are seeing leverage based components in larger middle market deals. For example, $50 million plus additional debt that would cause net leverage to be no more than closing leverage. One nuance is that you would deem any incremental RC or delayed draw term loan to be funded for purposes of the leverage ratio test. Also, the net leverage ratio would not net incremental loan proceeds from outstanding debt for purposes of the test. Finally, a borrower friendly feature is not to count debt incurred under the FAC basket when running the leverage test. For example, if net leverage is 4.5x at closing, you could add incremental debt up to closing date net leverage and then add additional debt under the FAC and still comply with the incremental facility tests.

TLL: How about other baskets?