Competitive Bid Loan Provisions: Q4 2022/Q1 2023 Update

A competitive bid loan facility is a feature that can be added to a credit agreement to provide additional pricing flexibility for investment grade borrowers. Competitive bid loans allow the borrower to solicit bids from its lenders to provide loans on maturities and interest rates different than those applicable to standard revolving loans.

According to Market Standards, out of 262 credit agreements surveyed in Q4 2022, 10 deals (3.8%) contained a competitive bid loan feature. Out of 262 credit agreements, 76 deals were for aggregate loan amounts over $1 billion, and out of the 76 deals over $1 billion, 8 deals (10.5%) contained a competitive bid loan feature (see this search in Market Standards). Out of 175 credit agreements surveyed in Q1 2023, 5 deals (2.9%) contained a competitive bid loan feature. 57 of these 175 deals were for an aggregate loan amount over $1 billion, and out of the 57 deals over $1 billion, 4 deals (7%) contained a competitive bid loan feature (see this search in Market Standards).

Competitive bid loan provisions are more likely to be included in deals with a higher commitment amount which are typically made to higher-credit borrowers. Review this practice note for an overview of competitive bid loan provisions and a discussion of recent trends in publicly filed credit agreements.

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Related Content

• Tranches of Loans and Loan Mechanics in Credit Agreements
  Review this practice note describing the types of loans available to a borrower, whether as a revolving line of credit or one term draw-down, and the process by which the borrower requests that funds are made available to it under a credit facility.

• Competitive Bid Loan Promissory Note (Credit Agreement)
  Use this template competitive bid loan promissory note in an investment grade credit agreement that includes a competitive bid loan facility.

• Structuring a Financing Transaction
  See this practice note for a general overview of how a financing is structured. It discusses the reasons a financing is entered into and how those reasons drive the components of a financing.

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