The depth and liquidity of the investor base in the US institutional term loan market provides an attractive alternative for European borrowers in the leveraged finance market and has been a key source of financing liquidity, particularly in the last few years as European markets have suffered from macroeconomic uncertainty and regulatory constraints. The comparatively lower pricing of US dollar leveraged loans available in the US compared to that of leveraged loans in the European market has also been an attraction for European borrowers, even once the cost of currency hedging has been factored in.
There are, however, a number of issues to consider in structuring so called “Yankee Loans” (US institutional term loans provided to European borrower groups governed by New York law credit documentation). These are driven primarily by differences in restructuring regimes in the US and Europe, and also by the needs (and expectations) of US institutional term loan investors.
Originally published in The International Comparative Legal Guide to Lending & Secured Finance 2014.
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