Reported 3 months ago
Leveraged loan issuers are including step-down clauses in their borrowing terms to potentially lower interest rates by a quarter point if certain targets are met, such as an IPO or credit upgrade. Negotiating better terms due to high demand, companies like Worldpay, Ardonagh, and BMC Software have secured lower margins on their loans. Despite concerns about reduced returns for lenders if the Fed cuts rates, investors like Polen Capital see the clauses as incentives for companies to achieve positive credit events.
Source: YAHOO