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As EBITDA moves north, covenant packages move south

Being a lead arranger allows a credit manager the ability to negotiate deals, which in the lower mid-market tend to have better lender protections, says Twin Brook Capital Partners’ Garrett Ryan.

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The lower mid-market, generally those companies with under $30 million of EBITDA, offers direct lenders better covenant packages and less wiggle room for borrowers; once the companies get larger than $40 million of EBITDA, the covenant packages begin to deteriorate and are less robust, says Garrett Ryan, a partner at Twin Brook Capital Partners and the firm’s head of capital markets. In addition, serving as a lead arranger on a transaction allows for better economics and allows the manager to develop a relationship with the private equity sponsor backing the borrower.