What is a Structured Term Loan?

Structured term loans or notes in the asset-based lending (ABL) context provide a way for borrowers to access more sophisticated financing options while still leveraging their assets as collateral. They offer flexibility in terms of repayment and can be tailored to specific business needs. They are often used in larger merger and acquisition context with sophisticated institutional investors, such as private equity funds.

Asset-Backed: Like traditional ABL, these notes are typically secured by specific assets such as accounts receivable (A/R), inventory, or equipment. The repayment structure can be tailored to meet specific needs, potentially including variable interest rates or payments linked to the performance of underlying assets or indices.

Key Features

• Flexible Repayment: May include features like interest-only periods, step-up payments, or balloon payments at maturity.

• Embedded Options: Can include call or put options, giving either the borrower or lender flexibility in managing the debt.

• Additional Liquidity: Allows borrowers to access capital beyond what traditional ABL facilities might provide.

• Tailored Risk-Return Profile: Can be structured to align with the borrower's cash flow projections and risk tolerance.

Considerations

• Complexity: These instruments are more complex than traditional ABL facilities and require careful structuring and analysis.