USA Law and Practice Contributed by: Stelios G Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins LLP
3. Structuring and Documentation 3.1 Common Structures In recent years, we have seen the size of private credit transactions continue to grow while the dry powder available for deployment by such direct lenders has simultaneously increased. • Increasingly shorter process: The timeline for trans - actions in the private credit space is consistently shrinking. In recent times, sponsors have increas - ingly elected to equity backstop new acquisitions and skip a commitment letter process and instead move directly into the credit agreement negotia - tion. Of course, this type of process would not be possible in the syndicated market. • Delayed-draw term loans: Private credit providers are well positioned to make delayed-draw facili - ties readily available. In instances where a sponsor is looking to implement a “growth by acquisition” strategy, this ability can make a private credit solution more attractive than a syndicated option, which may not include an accompanying delayed- draw component. It is less typical for syndicated solutions to offer sizeable delayed-draw compo - nents. • Portability: Private credit lenders are typically closely engaged with the sponsor and well posi - tioned to move quickly on amendment transac - tions. In 2025, with the increase in M&A activity, we also saw an uptick in the number of amendments and refinancings which included the addition of portability (ie, a “permitted change of control”) allowing the opco to trade hands without triggering an event of default. • PIK: Sponsors are often seeking PIK options in private credit transactions to allow the sponsor increased flexibility in managing liquidity. • Financial covenants: Financial covenants in private credit transactions are increasingly looking more like those financial covenants included in syndi - cated transactions. In other words, where private credit lenders had previously sought financial main - tenance covenants applicable to the full facilities, recent private credit transactions mirror syndicated documentation in providing for a springing finan - cial covenant only applicable to the revolver and
implicated in the commercial lending context due to the broad scope of California’s commercial lender licensing requirement. The US states that may impose commercial lending licensing requirements (unless an exemption from such licensing requirements applies) generally include California, Florida, Nevada, North Dakota, South Dakota and Vermont. While New York has a commercial lending licensing requirement, such requirement only applies to busi - ness and commercial loans in the principal amount of USD50,000 or less that also meet other specified conditions. 2.2 Regulators of Private Credit Funds Certain US state banking regulators are the prima - ry regulators for private credit activity in the United States. 2.3 Restrictions on Foreign Investments Special rules may apply depending on the industry and asset, but typical areas of regulatory approval for acquisitions (or financings thereof) include US antitrust regulations, foreign direct investment laws applicable to the industry and asset (for example CFIUS approvals), along with customary sanctions, anti-money laundering and KYC rules that apply to lenders generally. 2.4 Compliance and Reporting Requirements Private credit providers may have specific report - ing requirements to their investors and to regulators depending on the vehicle utilised. As an example, business development companies arranged by private credit providers may implicate specific disclosure and reporting requirements. 2.5 Club Lending and Antitrust Private credit providers are able to provide sole under - writes or club deals for multibillion-dollar transac - tions on terms that are competitive. To this point, this approach of forming clubs to facilitate larger transac - tions has not encountered any regulatory impediment.
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