Accordion Feature
Private Credit glossary · Documentation, Covenants & Terms
Definition
A provision allowing the borrower to increase the size of an existing facility (a permitted incremental facility) without a full refinancing, typically up to 1.0–1.5× EBITDA or a fixed dollar amount, subject to: (i) pro forma covenant compliance after the draw and any acquisition, (ii) Most Favored Nation (MFN) protection that raises the existing loan's spread to within 50 bps of any wider incremental pricing, and (iii) market-clearing pricing on the new tranche.
Accordion Feature in plain English
Imagine you took out a loan, and the paperwork has a built-in option to borrow MORE later without renegotiating the whole deal from scratch — that pre-approved extra borrowing room is the "accordion" (it stretches, like the instrument). Companies love it because refinancing is slow and expensive, so having room to expand later is handy. But lenders don't hand this out freely: the borrower usually has to prove it's still financially healthy after taking the extra money, pay a going market rate on the new chunk, and there's a rule called MFN (Most Favored Nation) that says if the new money is priced more attractively for lenders, the OLD lenders get bumped up to almost that same better rate — so nobody feels cheated by the newer deal.
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