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Corporate partner David Tarr spoke with Refinitiv about restrictions direct lenders have placed on the percentage of adjustments, known as EBITDA add-backs, in financings backing middle market leveraged buyouts. Such adjustments are calculated by adding operating income to the earnings before interest, taxes, depreciation and amortization (EBITDA) metric to create an adjusted EBITDA number. In “Direct Lenders Limit Ebitda Add-Backs Concerned With Borrowers’ Liquidity,” published on March 3, David notes that after months of restricted liquidity and an uncertain economic outlook, borrowers and lenders in the middle market are agreeing to tighter terms, including EBITDA add-back caps of about 25% of EBITDA.
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