An incremental facility is part of a credit contract that, subject to compliance with certain previously agreed parameters, gives the borrower the flexibility to take on additional obligations (or increases) of bonds. They will generally benefit from guarantees and guarantees on the same basis as other existing facilities obligations. In the past, large-scale agreements and top animal sponsors are retained, incremental institutions (otherwise known as accordion or additional organizations) are an integral part of credit markets and are increasingly common in the area of corporate credit. With regard to loan-financed loans, incremental facilities were integrated to such an extent that, for all European operations pursued by DebtXplained in 2015, only 1% contained no incremental ease. The frequency with which incremental facilities are included in the facility agreements has led some stakeholders to ask the credit market association (“LMA”) to include in their recommended form of agreement on loan-financed facilities a number of optional provisions relating to incremental facilities (the “LMA provisions”). After that, we briefly examine some aspects of incremental facilities and examine some key elements of the LMA`s language of presentation. It is customary for the incremental facility clauses to contain provisions for the most favoured countries (MFN) under which the pricing of incremental facilities is not exceeded in relation to the existing facility in question, unless an additional tariff benefit is granted to the existing facility in this area, to the extent that it exceeds that level. The primary purpose of an MFN is to protect the value of the initial debt on the secondary market and, given that these provisions act to protect existing lenders and are widespread in the market, it is perhaps not surprising that the provisions of the AML contain restrictions on pricing an incremental facility. However, there are some striking points with respect to the provisions of the AML. First, in the case of an actual construction, there is no MFN provision in the AMA, since there is only one overall return ceiling that can be linked to any incremental debt. While this has the advantage of simplifying the provisions of the AML, borrowers may find such a construction restrictive, as it sets specific ceilings for setting incremental debt prices, which may limit a borrower`s ability to raise additional debt. Second, while the MFN is generally not only tied to margin, but only to margin (although it is not uncommon for the MFN to be solely margin-bound), a borrower is generally free to negotiate the allocation of that return as he sees fit. On the other hand, the provisions of the AML are highly prescriptive in that they not only limit the weighted average performance (which includes margin, all non-commitment fees and primary syndication rebates) that may be generated by incremental ease, but also seek to cap commitment and intermediation fees separately, which is no longer included in the current incremental facilities provisions.

Finally, it has become increasingly common for all provisions of the MFN to include an expiration period of 6 to 24 months beyond which such price restrictions will no longer apply, although this sunset may be extended or removed during primary syndication, and the provisions of the MFN increasingly apply only for incremental maturities that are increased in the same currency as the existing facility.