We also look at the positives/benefits of Sleeping SLLs to inform the market debate in a deeper way.
What is a Sleeping SLL (“Sleeper SLL”)?
This is essentially a normal conventional loan, however, within the documentation, there is an option which if activated can change the loan into an SLL (Sustainability Linked Loan) subject to various conditions.
In other words it’s a normal loan that is not marketed as an SLL (or at least shouldn’t be), however, the documentation provisions to change this into an SLL may be activated in the future once KPIs and Targets have been established and agreed upon by lenders.
Key Potential Implications
Conclusion
Whilst we agree this is not a perfect structure, if appropriate caveats and no misrepresentations are made, these structures can provide flexibility and support more borrowers to transact SLLs.
This issue is more that just a good head-line, as per the above.
Sleeper SLLs can allow more participation from companies and time for more robust structures to be in place whilst supporting ongoing funding needs and related timings which can be dynamic for many corporates.
