Deal Process: From Mandate to Closing — A Complete Practitioner's Timeline
A single LevFin deal involves 40-60 professionals working around the clock for 6-8 weeks. PE sponsor, arranger banks, law firms, rating agencies, CLO managers — who does what and when, the apprenticeship knowledge every banker from analyst to MD needs to know, broken down stage by stage.
1. Deal Timeline — All 6 Stages
T = mandate signing date. In practice, all stages overlap — legal documentation and the rating process almost always run simultaneously.
Key players: PE Sponsor + 3-5 Banks
Key Tasks
- ▸PE initiates financing discussions with 3-5 banks
- ▸Each bank runs 'quick credit' — 2-3 page internal memo
- ▸Banks pitch terms: commitment size, fees, flex provision
- ▸PE selects arranger based on terms, relationship, execution
Key Documents
- 📄Internal quick credit memo (confidential)
- 📄Draft Terms Sheet
- 📄NDA
💡 Insider Tip
"3-way beauty contest" — banks compete, PE plays them off. The bank committing most aggressively often wins. But committing too tightly means the bank takes losses if the market requires flexing.
Key players: Lead Bank + Internal Credit Committee
Key Tasks
- ▸Mandate letter signed — names arranger/bookrunner
- ▸Commitment letter: bank commits to provide financing on specific terms
- ▸Fee letter: all fees listed (arrangement, upfront, commitment, flex)
- ▸Conditions precedent (CPs) defined — what must happen before closing
- ▸Internal credit committee approval at the bank
Key Documents
- 📄Mandate Letter
- 📄Commitment Letter (legally binding)
- 📄Fee Letter (confidential — most sensitive)
- 📄Internal Credit Committee Memo
💡 Insider Tip
The fee letter is never disclosed in CIMs or public filings. It lists the flex provision — exactly how much market risk the bank has taken. A Highly Confident Letter differs from a hard commitment: the former puts market risk on the issuer, the latter on the bank.
Key players: Law Firms + Rating Analysts + Bankers
Key Tasks
- ▸Credit agreement drafting — 200-400 pages (Simpson Thacher/Kirkland/Latham)
- ▸Indenture drafting (for HY bonds) — similar length
- ▸Rating agency submission: financial model, management presentation, industry analysis
- ▸Rating call: 2-hour call with S&P/Moody's analyst
- ▸Preliminary rating issued (typically 4-6 weeks from submission)
Key Documents
- 📄Draft Credit Agreement (multiple versions)
- 📄Draft Indenture
- 📄Rating Agency Submission Package
- 📄Management Presentation (confidential)
💡 Insider Tip
Rating agencies have leverage over the deal — B- instead of B widens spreads 50-100bp, costing the issuer millions annually. PE sponsors often push management to present more aggressive projections. The rating committee is a black box — analysts don't control the outcome.
Key players: Bankers + Management + PE Sponsor
Key Tasks
- ▸CIM finalized (80-120 pages)
- ▸CIM distributed to investors (after NDA)
- ▸Bank meeting held (TLB) / Roadshow (HY bonds)
- ▸'Color' calls — pre-meeting feedback from 10-15 key accounts
- ▸Management presentation ~45 min + Q&A 30 min
Key Documents
- 📄CIM (Confidential Information Memorandum)
- 📄Sources & Uses Table
- 📄Pro Forma Financial Model
- 📄Q&A Preparation Document (30-40 pages)
💡 Insider Tip
The bank meeting Q&A is where deals live or die. CLO analysts ask the toughest questions — 'What happens to your EBITDA if volumes drop 15%?' PE sponsors prepare 30-40 page Q&A documents, MDs get nervous, and management gets coached.
Key players: Syndication Team + Institutional Investors
Key Tasks
- ▸IPT (Initial Price Thoughts) launched — typically 25-50bp wider than expected final
- ▸'10AM update': banker calls deal team each morning with book status
- ▸'EOD update': end of day summary — accounts, volume, quality of orders
- ▸Guidance issued when book is 3× covered — spread tightens
- ▸Subject allocations — allocated but not confirmed until pricing
Key Documents
- 📄Daily book update (internal)
- 📄IPT Announcement
- 📄Guidance Announcement
- 📄Subject Allocation Table
💡 Insider Tip
The quality of the book matters as much as size. 'Flip' accounts who immediately sell in secondary are unwanted — bankers know who flips. Long-only accounts (insurance, pension) are preferred for stability. An MD's job is partly 'managing the book' — deciding who gets what and how much.
Key players: Lead Bank + Issuer + Investors
Key Tasks
- ▸Final spread set ('priced')
- ▸Book closed
- ▸Allocations sent within 2-4 hours of pricing
- ▸TLB: 'closed' — lenders sign credit agreement simultaneously
- ▸HY: 'priced' — bonds settle T+5 after pricing
Key Documents
- 📄Executed Credit Agreement
- 📄Allocation Letter
- 📄Pricing Supplement (HY)
- 📄CUSIP/ISIN issuance
💡 Insider Tip
The 4 hours between pricing and allocation are intense — bankers are on the phone nonstop. PE sponsor asks 'where did we land?' The allocation process is discretionary — friendly accounts that have been loyal for years get better allocations.
Key players: All Parties (PE, Management, Banks, Lawyers)
Key Tasks
- ▸Conditions precedent (CPs) satisfied
- ▸Funds flow: loan proceeds wire to acquisition account
- ▸M&A closing simultaneous with financing closing
- ▸MAC (Material Adverse Change) clause check — break-up risk window
- ▸Closing dinner (traditional celebration)
Key Documents
- 📄Closing Certificate
- 📄Funds Flow Memorandum
- 📄Security Agreement
- 📄Pledge Agreements
- 📄Intercreditor Agreement (if multi-tranche)
💡 Insider Tip
'Closing dinner' is a LevFin tradition — PE, management, banks, lawyers celebrate. But junior bankers are sometimes too exhausted to attend after 6-8 weeks of sprinting. Real industry joke: 'The only junior banker who makes it to the closing dinner is the one who has already resigned.'
2. Commitment Papers — The Confidential Core Documents
The fee letter never appears in any public filing. This is why it is the most confidential document in any LevFin deal.
Legally binding on bank. Sets key terms.
200-400 pages. Main operative document.
Describes collateral (asset list).
Share pledges (holdco equity).
Multi-tranche seniority coordination.
All fees + flex. Never disclosed publicly.
Bond terms + covenants in full. Public.
144A or RegS. Investor disclosure document.
A/B exchange — converts private to registered bonds.
Formalizes bank commitments.
Fee Letter — The Most Confidential Document in the Deal
The fee letter contains the arrangement fee, upfront fee, commitment fee, extension fee, and the complete flex provision. It never appears in the CIM or any public filing — knowing the flex range reveals exactly how much market risk the bank has taken.
3. Writing the CIM — Anatomy of an 80-120 Page Document
The CIM is the deal's sales document. Investors decide on hundreds of millions based on this alone. It's why bankers pull all-nighters to produce it.
| Section | Pages | Written By |
|---|---|---|
| Executive Summary / Business Overview | 10–15 | Bankers (VP/Analyst draft → MD review) |
| Industry Analysis | 15–20 | Bankers (external research + proprietary analysis) |
| Competitive Positioning | 10–12 | Management-provided data + bankers edit |
| Financial History & Projections | 20–25 | Based on financial model — mgmt-provided, bankers review/restructure |
| Management Team | 5–8 | Management provided directly |
| Transaction Structure (Sources & Uses) | 5–10 | Bankers (legal review) |
| Debt Schedule | 5–8 | Bankers' financial modeling team |
| Risk Factors | 8–12 | Led by law firm (liability issues) |
📝
10–15
Total Draft Rounds
Typical CIM
🌙
3–5
All-Nighters
Per CIM
📅
2–3 wks
Writing Period
Parallel with legal docs
4. Rating Agency Process — Decoding the Black Box
One notch — B vs B- — can mean millions annually. Rating agencies hold real leverage over the deal, yet few outsiders understand how the process actually works.
Confidentially submit financial model, management presentation, and industry analysis.
2-hour overview call with S&P/Moody's analyst. Business model, industry positioning, capital structure.
Deep dive on financial projections. Sensitivity analysis — 'EBITDA if revenues drop 15%?'
Receive list of additional questions. Issuer must submit detailed written responses.
Black box — analysts don't control the outcome. S&P: Business Risk Profile (1-6) × Financial Risk Profile (1-7) → Anchor → Modifiers → Final.
4-6 weeks after submission. Preliminary rating released. Final rating confirmed at closing.
💡 Rating Relationships — Agencies Compete for Fees Too
Moody's and S&P compete for fees. Issuers need dual ratings for most institutional mandates, but choose which agency to approach first. 'The agency that gave us B+ last time — let's go back.' Rating relationships matter. If an issuer is unhappy with a rating, there's an implicit threat to use the other agency — one of the structural criticisms of rating agency independence.
5. Book Build — From the 10AM Update to Final Pricing
The book build is the deal's heartbeat. Every morning's 10AM update reveals whether the deal lives or dies.
3–5 accounts
$100–200mn each
Top CLO managers. Early commitment creates momentum.
20–30 accounts
$25–100mn each
Mid-size institutional investors. Core volume of the book.
Varies accounts
$5–25mn each
Smaller accounts. Fill remaining volume.
Book Coverage Scenarios
→ Tighten spread 25-50bp
Strong demand. Issuer-friendly. Reverse flex possible.
→ Hold spread or tighten modestly
Adequate demand. No flex needed. Normal deal.
→ Exercise flex, restructure tranches, call PE for equity top-up
Danger signal. Deal cancellation or restructuring considered.
IPT → Guidance → Pricing — Typical Tightening (bps)
* Example: IPT 'mid-to-high 300s' → Guidance '325-350bp' → Pricing '325bp'. Total 50bp tightening.
6. Fee Structure — What Does a Deal Actually Cost?
For a $1bn LBO, fees alone run $25-40mn — before any interest cost. You can see why LevFin banks want these deals.
Recipient: Arranging banks
Paid at mandate. Split among participating banks after syndication.
Recipient: Investors via arranging banks
Includes OID in TLB context. Discounts principal to boost investor yield.
Recipient: Revolver lenders
Paid even if undrawn — bank must hold capital against the commitment.
Recipient: Lead bank (acting as agent)
Covers admin for entire loan life — collecting/distributing interest, monitoring conditions.
Recipient: Underwriting banks
Includes underwriting fee + management fee + selling concession. $1bn bond = $35mn in fees.
💰 Total Financing Cost Estimate — $1bn LBO
* Based on TLB $600mn + HY $400mn. Actual costs vary by market conditions and rating.
7. Market Flex — How Banks Protect Themselves
Flex is the bank's protection mechanism written into the commitment letter — the right to adjust terms if syndication would otherwise fail. Who bears the cost of flex is the critical question.
⚠️ What Flex Really Means — Banks Don't Compensate
When flex is exercised, the bank provides no compensation to the issuer. A 50bp wider spread means the issuer permanently pays millions more every year. The banker's job is to price IPT correctly so flex is never needed. A well-managed book covered 3× may even see reverse flex — the issuer pays less. Flex is never exercised publicly — one of the reasons the fee letter stays secret.
8. Korean LevFin Process — How It Differs Globally
MBK·Homeplus (2015, KRW 7.2tn), Carlyle·ADT Caps (2014, $1.4bn) — large Korean LBOs follow a similar process but with significant differences from global standard.
| Item | Global (US Standard) | 🇰🇷 Korea |
|---|---|---|
| CIM | 80-120 pages, mandatory. Distributed to all investors. | Often skipped in domestic bank deals. Prepared when foreign PE is involved. |
| Rating Process | S&P + Moody's dual rating. 4-6 weeks. | NICE Ratings + KIS (Korea Investors Service). International agencies added for USD bonds. |
| Syndication | Broad institutional syndication including 100+ CLOs. | 4-6 major bank syndication. KB, KEB Hana, Shinhan as arrangers. |
| Credit Agreement | 200-400 pages (LSTA standard). English. | Loan agreement 50-80 pages. Korean. Much simpler. |
| Deal Timeline | 6-8 weeks typical. | 4-8 weeks. Domestic deals somewhat faster. Regulatory approvals can vary. |
🇰🇷 Case: MBK·Homeplus (2015, KRW 7.2tn)
Korea's largest LBO ever. Arrangers: Citi + Goldman Sachs (international) + KB Kookmin Bank (domestic). Mixed global standard and Korean local process. USD tranche syndicated to international investors with CIM and English credit agreement. KRW tranche used simplified domestic bank syndication with Korean-language loan agreement. NICE + KIS ratings in parallel. Deal timeline: approximately 5-6 weeks. The deal became controversial due to Homeplus's subsequent financial pressure, but the process itself is considered a landmark in Korean LevFin development.
Frequently Asked Questions
References
- [1]LSTA (Loan Syndications and Trading Association). The LSTA's Complete Credit Agreement Guide— LSTA, 2023
- [2]
- [3]
- [4]
- [5]
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