Loan Buyback Provisions in Credit Agreements

Summary

This practice note discusses loan buyback provisions in credit agreements. Many borrowers and equity sponsors with excess cash on hand may wish to buy up or buyback some of the borrowers' own debt trading at below par prices. In connection with such a buyback, the loans are then extinguished or retired. This provides the added benefit of de-leveraging the borrower and providing additional room under its financial covenant calculations.