Price-Flex
language. Market flex permits arrangers to alter the prices associated with loan predicated on investor demand—in some situations within a predetermined range—as well as change amounts between various tranches of financing, being a standard function of loan commitment letters.
Market-flex language, in a stroke that is single forced the mortgage syndication procedure, at the least into the leveraged arena, throughout the Rubicon to a full-fledged money areas work out.
Initially, arrangers invoked language that is flex make loans more desirable to investors by hiking the spread or reducing the purchase price. This is logical following the volatility introduced by the Russian financial obligation debacle. In the long run, nevertheless, market-flex became an instrument either to improve or decrease prices of that loan, according to investor need.
Cost flexes could be a beneficial barometer of precisely how hot (or cold) the leveraged loan marketplace is at any moment. If you can find alot more issuer-friendly flexes ( the place where a loan’s rates is reduced during syndication) than investor-friendly flexes (where rates is increased), there marketplace is most likely hot, with additional interest in leveraged loan paper than there was supply.
After the instance above, in the event that loan is oversubscribed at LIBOR+250, the arranger may cut the spread further. Conversely, in case it is undersubscribed, even at LIBOR+275, then a arranger might be obligated to improve the spread to carry additional money into the dining table. Continue reading “Following the Russian financial obligation crisis roiled industry in 1998, arrangers adopted “market-flex””