Bridge to bond facilities

Produced in partnership with John Burge of McDermott Will & Emery and Sophie Rezki of McDermott Will & Emery

Practice notes

Bridge to bond facilities

Produced in partnership with John Burge of McDermott Will & Emery and Sophie Rezki of McDermott Will & Emery

Practice notes

What are they?

A bridge to bond facility is a type of acquisition financing where the buyer requires the certainty of a fully committed financing package, but which is intended to be replaced in the future with a mid- to long-term financing in the form of high yield bonds.

In markets where acquisitions typically do not have a financing condition, a bridge financing package (which is available to be drawn if necessary) is often a key component to a successful bid.

This Practice Note focuses on bridge to high yield bond financing. However, investment-grade borrowers also commonly use bridge facilities for acquisitions. Bridge commitments for investment-grade borrowers differ in many ways, including: lower pricing, much less Restrictive covenants (the terms often follow the borrower’s existing credit facilities) and the Securities demand mechanic may not be included (or if included, it may only be triggered by ratings Downgrade). Bridge commitments for investment grade borrowers may also have longer maturities (or extension rights exercisable by the borrower) and be

John Burge

Partner, McDermott Will & Emery

John is a partner in the transactions team at McDermott Will & Emery and specialises in acquisition finance matters, both for financial sponsors and corporates and has extensive experience acting for funders and borrowers in relation to unitranche facilities and syndicated loans. He is also experienced in lending across all levels of the capital structure, special situations and rescue financings.

Sophie Rezki

Senior Associate, McDermott Will & Emery

Sophie Rezki is a Senior Associate in the London Finance, Restructuring and Special Situations Group. She focuses her practice on complex debt financing transactions for private equity funds and their portfolio companies, corporate borrowers and financial institutions including banks, direct lenders, and other institutional investors. Her experience includes acting on direct lending transactions, leveraged buyouts, domestic and cross-border syndicated senior and junior lending, recurring revenue transactions, data center financings, restructurings and special situations. Sophie is experienced in advising clients on complex technical issues which may arise from English but also foreign law perspectives.

Jurisdiction(s):

United Kingdom

Key definition:

Restrictive covenants definition

What does Restrictive covenants mean?

A covenant requiring the covenantor not to do the thing specified. In order to be enforceable, such provisions should be reasonable and necessary for the protection of the target company’s/target business’ legitimate business interests. Restrictive covenants in a SPA/APA restrict the seller’s activities during an agreed period so that the buyer can try and protect the value of the target company/target business being acquired.

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