Leveraged Lending

Underwriting Standards

The following issues should be addressed either in the loan policies or specific underwriting guidelines:

Appropriate loan structures.

Amortization requirements of term loans.

Collateral requirements, including acceptable types of collateral, loan-to value limits, collateral margins, and appropriate valuation methodologies.

Covenant requirements, particularly minimum interest and fixed charge coverage and maximum leverage ratios.

How enterprise values and other intangible business values may be used, along with acceptable methodologies, and frequency and independence of assessment reviews.

Minimum documentation requirements for appraisals and valuations, including enterprise values and other intangibles.

Acceptable fixed charge coverage ratios and standards for calculation.

Measures of debt repayment capacity that reflect a borrower’s ability to repay debt without undue reliance on refinancing.

For loans originated -for sale, the degree to which underwriting standards are permitted by policy to deviate from underwriting standard for loans originated for portfolio or investment.

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