Direct Lending
Flexible, creative financing solutions
Overview
Overview
What is Direct Lending?
Direct lending capital is an avenue for companies to access capital as an alternative to the syndicated loans or senior floating-rate capital traditionally provided by banks. Direct lending loans are provided by "non-bank" lenders, such as institutional investors
Direct Lending Structure
Direct lending loans are primarily first lien, senior secured floating-rate loans, but can also be second lien, revolvers, or accordion/delayed-draw facilities. They have flexible amortization profiles and final maturities that usually range from 5 to 6 years.
The direct lending market has become a permanent source of capital for borrowers. It is largely a leveraged buyout-driven, sponsor-led market, but relies on private placement-style credit and terms underwriting.
Hear Matt Harvey, Jeff Dickson, and Sarah Bittner provide an overview of Direct Lending.
Typical size, structure, uses, and benefits ▼
Typical size
- $25 million - $400 million
Typical uses
- Recapitalizations/dividend recapitalizations
- Growth
- Acquisitions
- Shareholder buyouts
- Generational transfers
- Non-sponsored management buyouts
- Sponsored leveraged buyouts
- Cross-border financings
Structural characteristics
- Floating rate
- Revolvers, accordions, and/or delayed-draw term loans
- 1%-10% yearly amortization with an excess cashflow sweep
- Typical maturities of 5-6 years
Issuer benefits
- Ability to do multi-currency, cross-border transactions
- Flexible prepayment terms
- Relationship-focused capital provider
