Short-term financing used until permanent funding is arranged. In leveraged finance transactions, a bridge facility typically has a maturity of 12 months, and also includes certain margin step-ups, which incentivize the borrower to refinance the bridge with permanent financing.

Often used in transactions involving a high yield bond component, in cases in which there is not enough time to arrange the bond financing before the closing of an M&A transaction. In this case, the Underwriters fund a bridge loan at the transaction closing. This bridge is subsequently refinanced when the high yield bonds are put in place.

If you would like to learn more about the financing process, please see our Termgrid Primers – Series 1: The Debt Financing Process.