Syndication Nation — The TLA-ming of the shrew

Anyone who was in the LevFin market in 2022 may remember banks using term loan As to fill the financing gap when rising interest rates disrupted the syndicated loan market. That instrument has made a comeback — except this time, the TLA is no longer a back-up, but a tool to get larger financings done.

In this episode, Cloud 9fin deputy LevFin editor Sasha Padbidri sat down with reporter Yiwen Lu and senior reporter Sunny Oh, to discuss the resurgence of the so-called pro-rata market.

We broke down the key features of TLAs, how banks use them to differentiate themselves from direct lenders, and the evolving lender base of TLAs. We also discussed how it played out in recent jumbo buyouts, including Hologic.

Have any questions? Send us a note at [e-mail]. You can also check out our feature on TLA here. Thanks for listening!

Creators and Guests

Producer

Chase Collum

Head of Podcasts for 9fin Limited

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Sasha Padbidri:
Hello, everyone. I’m Sasha Padbidri, Deputy Editor at 9fin, and welcome to this week’s episode of Syndication Nation with the Cloud 9fin podcast, where we unpack all things LevFin related.
On today’s episode, we have reporter Yiwen Lu and senior reporter Sunny Oh, who will discuss their recent reporting on the resurgence of the Term Loan A as a funding tool. So thank you both for joining me today.
Yiwen Lu:
Thanks for having us.
Sunny Oh:
Thanks.
Sasha Padbidri:
Awesome. Yeah, I’m ready to unpack this with you guys.
So the Term Loan A market has long been overshadowed by the high-profile institutional TLB market, and TLAs were originally used as a gap filler during choppy market conditions in the past.
But recently that seems to have changed, especially considering all the events that happened in January 2026. So can you both tell the audience a little bit about your observations based on recent mega buyout deals and also why market participants are describing this year as a watershed year for dealmaking?
Sunny Oh:
I’d say, first of all, it just goes to show the huge financing needs that are out there, and that’s kind of why this market has come to prominence.
And just to give you a general lay of the land of how these things work, a TLA is similar in structure, but it is prepayable. It has no call protection. It’s amortized much more quickly, and it tends to be a bit cheaper than TLBs.
We tend to see them more active when there’s times of turmoil, as you sort of alluded to. For example, in 2022, when the Fed’s hiking rates put pressure on markets, the TLB market was sort of in shambles. There were a lot of hung deals, and a lot of deals had to go to the TLA market.
So that’s kind of how people saw it as this gap filler. But today it’s being seen across a lot of LBO financings, which I think Yiwen can discuss.
Yiwen Lu:
Yeah, we’ve seen that in all the recent deals that we cover. I remember covering this back in May of last year, when I broke the news about the TLA syndication starting for Sanmina’s acquisition of CT Systems from AMD.
That was a pretty straightforward M&A deal, but it included a TLA component. Then coming into late last year, we saw that in some of the mega buyouts that you mentioned.
Hologic is a big one that includes around a $1.25 billion TLA tranche. BioMarin’s acquisition of Amicus Therapeutics as well. And then HNI, I think DICOM Industries as well, upsized its TLAs.
Of course, we’re going to see it in Sealed Air and EA, which has not launched yet but is widely expected. All of those deals including a TLA component just show how borrowers are tapping every part of the market to finance those mega buyouts.
And that really leads into your next question, which is why sources and market participants are saying that this year is going to be a watershed year for dealmaking.
Because really, I feel like last year, the talk on the Street was that lenders were craving more new-money deals, but M&A was really muted.
And since Liberation Day in particular, when we saw those buyouts last year, sources are expecting that there’s going to be more of those this year.
Especially with rate-cutting expectations, and the fact that lenders are sitting on a lot of new money, and sponsors are sitting on a lot of dry powder as well. So, I feel like TLA is still going to be used more in that situation.
Sasha Padbidri:
Great. That’s good to know.
You also mentioned in your recent report that TLAs help banks distinguish themselves from private credit lenders. So how does having a TLA help a bank win a deal against direct lenders, if to your point it’s going to be used more this year?
Yiwen Lu:
Yeah, it’s funny you ask that, because I feel like we’ve been seeing more TLAs in those smaller deals that would traditionally go to direct lenders.
They’re not those mega buyouts or M&A deals that we were speaking about before. Our colleagues on the private credit team reported that West Shore Home recently tapped a roughly $400 million TLA to do a refi and dividend recap.
So that is kind of just an example of how TLAs have won over private credit in a way. And really, I think the difference is, as Sunny mentioned, it is a lot cheaper as a financing tool.
It also really shows how banks can move up quickly compared to a traditional TLB syndication, where you have to get ratings actions done and wait in a public syndication process. This just moves a lot faster and is a signal to borrowers that banks can do what direct lenders are offering as well.
Sasha Padbidri:
Got it.
Just out of curiosity, could you tell us more about one prominent example of a TLA structure? I think for me, Hologic comes to mind.
Yiwen Lu:
Yeah, I think we spent a lot of time reporting on the financing structure of Hologic.
As I mentioned, it includes a $1.25 billion TLA. And on top of that, it’s a loan-only structure. It upsized the TLB syndication portion, and it’s now around $7 billion.
At a time when the pricing was totally oversubscribed, it also included a privately placed second-lien tranche.
So when it comes to the TLA structure, one thing we learned when reporting on how they decided on the financing process is that arrangers really wanted a prepayable structure.
That’s when a TLA came to mind, because the TLA portion doesn’t have a call premium, while the TLB portion has only a one-on-one soft call for six months.
That is kind of what made the structure more appealing to both the borrower and the broadly syndicated market. Having the TLA out there is really a signal to lenders that the arrangers themselves are confident in the deal and are willing to put their own capital down.
And the TLA is also cheaper in this case. I think it’s priced around SOFR+250, which is cheaper than the publicly syndicated portion.
Sunny Oh:
It’s also important to remember that the TLA portion gets done a bit earlier, so you’re de-risking the transaction. You limit the amount that actually has to go through the TLB market.
We’re seeing this with EA as well. Our colleague Bill has already reported that they’re getting through the TLA portion, so the amount of eventual financing that will hit the institutional market seems like it will be much less. That just makes execution much easier and makes these bigger financings more digestible.
I think the institutional investor base likes to see that.
Yiwen Lu:
I guess also to add on to that, the TLA usually has a shorter tenor.
For Hologic, for example, the TLA has a three-year tenor, which is a lot shorter than a traditional TLB. And that means it essentially kind of functions as a bridge loan to some sources.
Sasha Padbidri:
Got it. No, that’s good to know.
Another thing you mentioned in your reporting is that TLAs have an evolving holder base, and it’s changed quite significantly over the last few years. So what’s different now?
Yiwen Lu:
We’ve been hearing that there are a lot more participants.
As Sunny mentioned, usually banks would participate in a TLA loan, and sources have said that in the past you might have only had a single-digit number of banks participating. Now that has really expanded.
It’s also expanded in the types of banks that are participating. We’re seeing more regional banks and Asian banks taking down TLAs as a way to deploy their own capital, especially since loan growth has been quite limited over the past few years.
Sunny Oh:
Yeah, I think it’s definitely grown and diversified.
Having this diversification across geographies is quite helpful. If, say, financial conditions get choppy in one geography, like Asia, you can rely on Europe or U.S. regional banks. It helps spread out the counterparties.
So I think it’s probably good news that the buyer base is deepening for this market.
Sasha Padbidri:
Honestly, as someone who’s covered the market for a while, it’s good to see how much it’s changed over the years, and it’s really interesting that you guys are tracking it.
Since we’ve already talked about the pros of TLAs, are there any potential cons? Has anyone you’ve spoken with mentioned any downsides of this resurgence of TLAs?
Yiwen Lu:
One thing we’ve been hearing repeatedly is that banks are not planning to hold on to the TLA loans that they take on.
This happened a lot in the past, especially during 2022, during the gap-filler phase of TLAs, where they were really seen as a tool to make up for financing that couldn’t be reached in the publicly syndicated market.
And after around six months, during the period when banks were mandated to hold those loans, they would tend to sell them at a huge discount. And to a lot of institutional lenders, this really hurt the technicals of the TLB market.
That’s one thing people didn’t really want to see. But more recently, we’ve also been hearing banks say that this is no longer the case, and that they are willing to hold on to the loans for longer.
Sunny Oh:
Yeah, I think some of the TLB lenders, for example in Hologic, were particularly worried about some of the TLA holders flipping the loan.
But it seems like there were enough reassurances, and some of the TLB investors were comfortable with that.
I also think it depends on the type of person that’s underwriting the TLA.
Let’s say you’re more – because we can’t name names – if an investment bank, the name of the game isn’t to keep the loan on your balance sheet. You’re an underwriter. So you’re doing this just to keep business flowing, and you’re showing you’re a good partner to your clients.
But if you’re a regional bank, where loan growth is hard to find, it does matter being a buy-and-hold lender. And I think clients really appreciate that.
Yiwen Lu:
Another thing I would add is that the market doesn’t think TLA is going to be the main financing tool, even though we’re discussing its resurgence.
The main reason is that borrowers don’t see it as particularly appealing for the same reasons we discussed earlier. TLAs usually have a shorter tenor, and they often include a maintenance covenant compared to a covenant-lite structure.
That means the covenant could be triggered in any situations where a borrower’s financial performance declines, even before a payment is missed. That’s more restrictive than a covenant-lite structure.
And then there’s also the fact that banks could sell the loan. So in a lot of ways, we’ve seen more TLAs, but there are still doubts about how large this market can get.
Sunny Oh:
It reduces flexibility for sponsors, which is why TLBs are still the preferred option at the end of the day, with maybe a bit of TLA included depending on how confident you are in your ability to deleverage and prepay the debt.
Sasha Padbidri:
Great. Thank you both for unpacking this situation with me. I really learned a lot.
And to our listeners, if you would like a copy of the TLA story, please reach out to us at [e-mail].
Thank you for tuning in to this episode of Syndication Nation. We hope to see you again next time.