Private Credit Facilities

Senior secured term loans sit first in the capital structure with a first-priority claim on the borrower’s assets. Unitranche facilities combine what would otherwise be senior and junior debt into one instrument with one set of documents and a blended cost, which suits smaller borrowers who would rather deal with one lender. Delayed-draw and revolving elements allow the borrower to draw as needed against a commitment. Each is documented in a credit agreement with security over the assets that support it.

The loan is repaid from cash flow, so the analysis is of the business: revenue quality and durability, margins and their drivers, customer and supplier concentration, working-capital needs, and the management team’s record. Where a financial sponsor owns the business, its track record, equity contribution and willingness to support the company are part of the credit. Leverage and coverage are measured against stressed scenarios, not projections.

Security is taken over the assets that give the loan its value: receivables, inventory, equipment, intellectual property, equity in subsidiaries, and where relevant digital assets in custody. For an operating company that usually means a blanket lien, a UCC-1 financing statement covering all present and after-acquired personal property, perfected by filing with the secretary of state of the borrower’s jurisdiction and confirmed first in priority by a lien search, with deposit account control agreements over the operating accounts and a pledge of the equity in the borrower and its subsidiaries. Parent and, for smaller borrowers, personal guarantees sit behind the collateral. Covenants are the early-warning system: financial covenants such as a debt service coverage ratio, cash flow available for debt service against required payments, a fixed charge coverage ratio, which adds rent, taxes and capital expenditure to the denominator, a maximum leverage multiple and a minimum liquidity balance, each tested on the schedule in the credit agreement; information covenants that deliver monthly or quarterly financial statements and a compliance certificate on a fixed cadence; and negative covenants that stop the borrower adding debt or liens, moving assets, changing control or paying out value without consent. Cross-default provisions bring the facility into default if the borrower defaults elsewhere, and cross-collateralization lets the same security support every facility Wesvel has with the group.

Most operating companies have more than one lender. Where a revolving asset-based lender holds receivables and inventory and Wesvel lends on a term basis, an intercreditor agreement divides the collateral, sets each lender’s priority in the other’s collateral, and governs who can enforce and when. Where junior or subordinated debt sits behind Wesvel, a subordination agreement fixes payment blockage, standstill periods and turnover obligations. Existing lenders being refinanced deliver payoff letters and UCC-3 terminations at closing. Wesvel lends senior, and the documents that keep it senior are negotiated as carefully as the loan itself.

A covenant breach is a conversation before it is a default. Facilities are monitored against their covenants and against the business’s own reporting, and a deterioration triggers engagement: additional information, tightened terms, a fee, more security or a paydown. The credit agreement gives the lender the tools; the relationship determines how they are used.