medium · Corporate Credit Analysis covenants
An analyst is reviewing a 'Most-Favoured-Nation' (MFN) clause in a new Term Loan B agreement.
If the agreement includes a '50 bp sunset after 6 months', what does this imply?
- The pricing protection for existing lenders expires entirely six months after the initial closing.
- New lenders must offer 50 bp more margin than existing lenders to participate at all.
- The interest rate on the loan automatically decreases by 50 bp once six months have passed.
- The borrower is prohibited from issuing any new incremental debt tranches during the first six months.
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