What is a market flex provision, and what impact might a market flex provision have on a new financing commitment in light of COVID-19?
Market flex provisions provide arrangers and underwriters with flexibility as to the terms of a financing following the execution of a financing commitment or facility agreement. Such provisions are typically included by arrangers to permit the lender to make changes to key terms of a financing (e.g., pricing, yield, terms, structure, conditions) to make such financing more attractive to potential syndicate lenders and loan participants. Given the current and future volatility in the markets resulting from COVID-19, lenders may include market flex provisions in new financing commitments to allow them the ability to terminate financing commitments or alter the terms of new financing transactions. Any such market flex provisions should be carefully reviewed and limited as to scope and applicability.
Last updated March 16
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