Portability Gains Momentum in Leveraged Loans as Sponsors Look to Ease Exits

If you were to ask market participants about portability provisions in leveraged loan documentation even a few months ago, they’d likely look at you a little puzzled. And rightly so, since portability provisions which allow a borrower to keep its existing debt in place despite a change of ownership, were until very recently, typically limited to high-yield bonds.

As highlighted in our EMEA H1 Leveraged Loans Wrap, portability provisions within English law senior facilities agreements are now on the rise. Sponsors are eager to smooth the path to an exit and are negotiating for these provisions in a growing number of transactions.

In the U.S., portability provisions featured in 20 deals so far in 2025, of which 17 are leveraged-based and three include only ratings-based triggers.

This article examines the portability provisions, including the conditions required to exercise the permission within European leveraged loans documented under English law senior facilities agreements (European leveraged loans) and U.S. leveraged loans documented under New York law credit agreements (U.S. leveraged loans).

In addition to this article, a downloadable tracker is available on an anonymized basis, which provides all the underlying data.

Any reference or statistic provided for the year 2025 covers loans issued from Jan. 1, 2025, to Aug. 30, 2025. U.S. leveraged loans data will only cover the 2025 period.

With portability provisions gaining traction in leveraged loans in the first half of 2025, market participants are navigating unfamiliar terrain with limited visibility into precedent terms and conditions. Our comprehensive portability tracker addresses this critical information gap by providing anonymized insights into the evolving market dynamics.

This tracker provides an insight into portability provision trends, terms and structures across both European and U.S. leveraged loan transactions.

By analyzing real market data on an anonymized basis, we enable lenders, borrowers, sponsors and advisors to better understand market standards, negotiate more effectively and make informed strategic decisions. Our portability tracker provides the market intelligence you need to stay ahead of this rapidly evolving trend.

Portability provisions are appealing to both sellers and buyers alike. By including these provisions in a portfolio company’s debt documents, seller sponsors can enhance a company’s attractiveness to buyers by effectively providing prearranged financing solutions, streamlining the acquisition process and potentially improving valuations. At the same time, buyers can avoid costly and time-consuming refinancing when acquiring an asset. This can be particularly valuable during volatile market conditions when access to the primary market is limited.

In the following paragraphs, we have identified key trends in portability provision below, including areas of commonality and differences between European and U.S. leveraged loan transactions. Data is presented as a percentage of deals with portability provisions present.

Before reading this article, we’d recommend reading our Covenants 101 examining the importance of portability provisions and the common conditions attached within European leveraged loans documentation which is available HERE.

Compliance with a leverage test to exercise portability is required for all European leveraged loans in 2024 and 2025. A ratings test has not been seen yet in European leveraged loans.

A more stringent form of portability has appeared in over a majority of the U.S. leveraged loans. Around 53% of the U.S. leveraged loans required compliance with both a leverage test and for a specified minimum corporate rating to be held or no rating decline to occur following the change of control announcement.

As mentioned in the Covenants 101, the most protective test is a total net leverage test as it will take into account debt of the entire group (subject to explicit exclusions) and not only secured debt or secured debt of particular security ranking as would be included under a secured or senior secured test.

In 2024, nearly two-thirds of European leveraged loans opted for the more protective total net leverage test with the significant minority (37%) using a senior secured net leverage test. In 2025, this trend turned on its head with senior secured net leverage tests becoming the majority position (52%), with the remaining deals using the total net leverage test.

The position in U.S. leveraged loans is different compared with European leveraged loans. Over a third of U.S. leveraged loans require compliance with both a total net leverage test and a senior secured net leverage test. Around 41% of U.S. leveraged loans use a total net leverage test with about a quarter opting for just a senior secured net leverage test.

Where the leverage test is set for exercising portability is often a topic of hot discussion. Requiring deleveraging to access portability is seen as a way to assure investors that the new shareholders will be taking over the business with a healthier leverage than what was on offer at the time of initial syndication. This premise does not hold true when looking at leveraged loans, with very few deals in both Europe and the U.S. requiring deleveraging at closing to exercising portability.

In fact, when looking at the statistics, the conclusion is the complete opposite. A significant majority of European leveraged loans in both 2024 (72%) and 2025 (83%) as well as U.S. leveraged loans (79%) set the leverage test above opening leverage, meaning there is immediate headroom available at closing.

An interesting development in 2025 saw one European leveraged loan and one U.S. leveraged loan permitting the exercise of portability upon the leverage test not being made worse on a pro forma basis for the change of control. This ‘‘no worse’’ test would allow the borrower to be sold with the loans remaining outstanding, even though the leverage ratio is above the specified test, as long as the transaction does not see the leverage prior to the change of control increase upon completion.

A requirement that the new sponsor or shareholder have a minimum assets under management featured in around 63% of 2024 European leveraged loans, rising to 76% in 2025.

When required, the formulation typically takes the shape of a higher threshold if the buyer is a private equity firm or sovereign wealth fund with a step-down to a lower threshold if the purchaser is a strategic buyer active in a similar sector or if the entity is publicly listed. A significant amount of European leveraged loans in 2024 (60%) and 2025 (38%) featured a step-down for minimum assets under management requirement if the buyer is active in a similar sector or a listed entity.

All European leveraged loans in 2024 with the requirement set the minimum assets under management threshold for the buyer at 5 billion (€ / $). This requirement set at 5 billion (€ / $) declined in 2025 to comprise 75% of European leveraged loans.

In addition or as alternative to the minimum assets under management requirement, European leveraged loans may contain an “equity white list,” which could specify the names of sponsors or industry buyers that would be acceptable to the lenders to purchase the company. This ‘‘equity white list’’ features in 25% of 2024 leveraged loans and rises to 33% for 2025.

The minimum assets under management requirement similarly featured in just under 60% of the U.S. leveraged loans. However, in contrast with the European market, in the U.S., the minimum assets under management requirement is typically set below 5 billion (€ / $) in 90% of U.S. leveraged loans.

Also in contrast with Europe, the U.S. market demonstrates a more accommodating stance toward strategic buyers and listed entities. While 90% of U.S. leveraged loans set lower thresholds (below € / $ 5 billion), 40% take a more dramatic approach by completely eliminating assets under management requirements for sector-relevant or listed buyers rather than simply reducing them (compared with 13% in Europe in H1 2025).

The requirement that the new sponsor or shareholder contribute a minimum level of equity featured in 75% of 2024 European leveraged loans, rising to 86% for 2025 deals.

For European leveraged loans, the minimum equity required is set typically at 40% of the group’s overall enterprise value or capital structure. All 2024 European leveraged loans with the condition set the requirement at 40%, this fell to 78% in 2025 with the remaining minority setting the requirement at 35%.

The minimum equity requirement also featured in 71% of the U.S. leveraged loans. However, for U.S. leveraged loans, there is a greater range of percentages for the minimum equity condition. Setting the requirement at 40% continues to be the majority position (58% of U.S. leveraged loans), although at a lower proportion than seen in European leveraged loans. A significant minority (33%) of U.S. leveraged loans set the requirement at 30%, with the remaining minority setting the requirement at 35%.

In European leveraged loans, portability can typically only be exercised once over the lifetime of the term loan, with only 12% of 2024 European leveraged loans and 5% in 2025 allowing the permission to be exercised multiple times.

The European position can be contrasted with U.S. leveraged loans where multi-use portability is the majority position with it being permitted in 53% of deals.

In Europe, the absence of a time limit to exercise portability is off-market, featuring in only 13% of 2024 European leveraged loans and 10% in 2025.

This contrasts with what is seen in the U.S. where a majority of U.S. leveraged loans (53%) contained no time limit period on when portability must be exercised following closing.

When a time limit is present, the most common length for both European leveraged loans and U.S. leveraged loans is 24 months. About 18% of 2025 European leveraged loans and 12% of U.S. leveraged loans featured a longer time period of 36 months.