What is a bridge to bond facility?
A bridge to bond facility is a type of acquisition financing where the buyer requires the certainty of a fully committed financing package, but which is intended to be replaced in the future with a mid- to long-term financing in the form of high yield bonds.
What are securities demand provisions?
Business jargon for a provision in bank loan fee letters for bank/bond deals that permits the arranger to demand that the borrower issue debt securities to refinance the outstanding bridge loan arranged by the arranger.
Is a bridge loan A security?
Not all traditional mortgage lenders make bridge loans, but they’re more commonly offered by online lenders. Although bridge loans are secured by the borrower’s home, they often have higher interest rates than other financing options—like home equity lines of credit—because of the short loan term.
How does a bridge loan work in M&A?
Bridge loans are typically short-term facilities used to bridge a financing gap until the borrower is able to obtain long-term financing from the capital markets or another takeout. For example, a bridge loan with an initial term of one year likely will have an upward interest rate change on a quarterly basis.
How long does a bridge loan last?
Bridge loans (also known as swing loans) are typically short-term in nature, lasting on average from 6 months up to 1 year, and are often used in real estate transactions. They can be used as a means through which to finance the purchase of a new home before selling your existing residence.
Is it difficult to get a bridge loan?
Sound finances: To be approved for a bridge loan typically requires strong credit and stable finances. Lenders may set minimum credit scores and debt-to-income ratios. Generally speaking, if your financial situation is shaky, it could be difficult to get a bridge loan.
What is a ticking fee?
Ticking Fees (M&A Glossary) Summary. A fee imposed to compensate for lag time, effectively requiring the paying of interest on the cash portion of a deal during a certain commitment period, triggered by various conditions (often regulatory approval) and generally running until the deal’s closing.
What is the purpose of a bridge loan?
Put simply, bridge loans give you access to additional money with which to purchase a piece of real estate by allowing you to tap into added funds, or any equity that you hold in your current home prior to its actual sale.
Why would you need a bridge loan?
Common reasons to seek out a residential bridge loan include: Inability to afford a down payment without first selling your current house. A pressing need to quickly secure a new home. The closing date for a new purchase is scheduled after the closing date for the sale of your home.
When to demand securities on a bridge loan?
A borrower may request to limit the bridge lenders’ ability to make a securities demand until some period after the bridge loan funds (e.g., up to 180 days after funding) to allow for flexibility to fund the bridge in case the price of long-term debt is higher at closing.
What kind of loan is equity bridge facility?
Equity bridge facilities (EBF), also known as ‘subscription line facilities’ or ‘capital call facilities’, are short-term loans, leveraged on the limited partners’ commitments of infrastructure, private equity, real estate or other funds, and usually take the form of revolving facilities.
What do you need to know about bridge financing?
Bridge financing is short-term financing aimed to provide funds to companies until they obtain long-term financing. Bridge loans are expensive, given the risks associated with such types of loans. Equity bridge financing represents an exchange of capital from the lender’s side for an equity stake in a company from the borrower’s side.
Which is the most contentious provision of a bridge loan?
Often the most contentious provision when negotiating a bridge loan commitment is the securities demand, which provides the bridge lenders with the right to require the borrower to issue long-term debt securities into the capital markets to refinance the bridge loan.