What is a back leveraged transaction?

In a back leveraged transaction, the sponsors' lenders are structurally subordinated to the project company's lenders. If distributions to the sponsor are suspended for any reason (for example, because of an event of default or a cash sweep ), the sponsor may not have the cash necessary to meet its obligations under the loan.

What is back-leveraged debt & how does it work?

Back-levered debt is a reliable way of getting more cash into the hands of developers. Back-leverage rates are competitive, and some lenders are willing to give credit to merchant sales beyond the term of the initial power purchase agreement. Back-levered debt sits upstream of both the project and any tax equity financing.

What is back leverage & how does it work?

The bottom line is that back leverage can be used to eliminate one problem associated with debt finance (i.e., trying to negotiate an acceptable SNDA) while generating a different set of problems (in particular, assuring that there will be sufficient cash available to the MM to pay off its mezzanine-level debt obligation).