Club deal

A club deal, or club financing, is a small syndicated loan whose lenders the borrower chooses before launching the transaction. The term covers loans of less than $250m, premarketed to a circle of lenders with which the borrower has an ongoing relationship. Private debt funds use the same arrangement when the amount sought exceeds the ticket a single fund agrees to hold: two or more funds then share a senior or unitranche loan documented in a single agreement. For the borrower, a club deal differs from a broad syndication on several points. The chief executive knows each lender before signing and discusses the documentation with them. The membership of the group stays stable over the life of the loan when the transfer clause governs transfers of the debt. Waiver requests are handled among few participants, which shortens the time to reach agreement after a covenant breach. The club requires common documentation signed by all the lenders and a facility agent in charge of the flows between the borrower and the group. The majority rules of the facility agreement determine how many lenders must consent to amend a ratio or defer a repayment date. A lender whose share exceeds the blocking minority set in the agreement can block these decisions on its own.

An industrial services company generating €25m of EBITDA seeks €120m to refinance its debt and fund two acquisitions. Three private debt funds each take €40m in a shared unitranche loan, documented in a single agreement. The agreement sets the majority at 66.67% of commitments: the consent of two funds is enough to grant a waiver. A facility agent receives the drawdowns and repayments, then distributes them among the three lenders pro rata to their commitments.

• The list of lenders in the club and each one’s share of the financing
• The majority rules for waivers and amendments to the agreement
• The transfer clause that governs the arrival of new lenders in the club
• The role and fees of the facility agent