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Learn how $100M+ companies can replace a bank syndicate with private credit, ABL and structured capital while protecting liquidity.
A company with $100 million or more of bank debt may reach a point where the existing syndicate no longer fits the business.
One bank may want lower exposure. Another may object to an acquisition. A covenant reset may become difficult because several lenders need to agree. A maturity may be approaching while management wants additional capital for expansion, shareholder liquidity or another transaction.
Private capital can replace that syndicate, but the objective should not simply be to exchange several banks for one expensive lender.
The entire capital stack has to be rebuilt.
Quick Answer: Replacing a $100 million+ bank syndicate with private capital usually requires refinancing the senior debt, recreating working-capital liquidity, clearing or subordinating existing liens and matching each financing layer to its purpose. Private credit can offer greater structural flexibility, but higher cost, tighter documentation and refinancing risk still need to be tested against the company's downside cash flow.
A syndicated bank facility generally involves several financial institutions providing portions of a larger credit package, often under common credit documents with an administrative agent coordinating payments, reporting, collateral and lender decisions.
Replacing the syndicate means more than paying off a term loan.
The company may need to replace a revolving facility, letters of credit, treasury services, equipment financing, hedging arrangements, real-estate debt and other facilities that have become embedded in daily operations.
That is why the first exercise should be a complete debt map.
Management needs to understand what each existing lender provides, what collateral supports it, what has to be repaid at closing and which facilities need to remain operational after the refinancing.
For Canadian businesses beginning with the basic refinancing mechanics, Mehmi's guide to how business refinancing works provides useful background on replacing an existing lender and cleaning up liens.
Cost is rarely the only reason.
Banks can provide attractive pricing, revolving liquidity and valuable treasury infrastructure. If the existing syndicate remains supportive and the company comfortably complies with its covenants, replacing it merely because private credit is available may not improve the business.
The case for private capital becomes stronger when the existing structure starts limiting a transaction the company otherwise has the capacity to execute.
Management may need substantially more leverage for an acquisition. The company may want a longer maturity with limited amortization. A sponsor may want to complete a recapitalization or shareholder distribution. The business may have experienced a temporary earnings decline that creates covenant pressure even though enterprise value remains strong.
Private lenders can sometimes negotiate these situations directly rather than distributing the exposure among several banks.
The private-credit market is now large enough to support substantial institutional transactions. The Federal Reserve reported that private credit loans represented about $1.4 trillion, or 10% of U.S. nonfinancial corporate debt, based on data from the second half of 2025.
Canada remains more bank-dominated. The Bank of Canada reported in August 2026 that non-bank loans have remained at roughly 15% of financing to Canadian businesses over the previous decade, although Canadian institutional investors themselves have significant private-credit exposure.
That difference matters when sourcing a $100 million+ replacement facility across North America.
Not necessarily.
Replacing three banks with one private-credit fund can simplify negotiations, reporting and amendments. One lender or one coordinated private-credit group may be able to provide a first-lien term facility that effectively functions like a unitranche structure.
But simplification should not become concentration for its own sake.
A company with substantial receivables, inventory and equipment may still benefit from several specialized capital sources.
For example, long-term corporate debt may be supplied by a private-credit fund while working capital sits in an asset-based revolver and equipment remains in separate equipment-financing facilities.
That can be more efficient than paying a private-credit lender's return requirement on every dollar of the company's financing needs.
For Canadian companies, Mehmi's Asset-Based Lending Canada guide explains why receivables and inventory are often better suited to a borrowing-base facility than a fixed corporate term loan.
A company can refinance a $75 million term loan and still create a liquidity problem if it loses a $30 million operating line at closing.
The revolver is frequently the least appreciated part of a bank syndicate.
It may fund inventory builds, payroll timing, letters of credit and seasonal receivable growth. It may also provide emergency liquidity during temporary earnings pressure.
Replacing that flexible liquidity with a fully drawn term loan can force the company to pay interest on capital it does not consistently need.
An asset-based revolver may be a better replacement where the company has meaningful accounts receivable and inventory.
Availability in an ABL facility typically moves with eligible collateral instead of remaining a fixed lump sum. Canadian borrowers evaluating this structure can review Mehmi's ABL borrowing-base guide for a deeper explanation of eligibility, advance formulas and reserves.
The key principle is to preserve liquidity after closing rather than celebrating how much debt was raised on closing day.
Not automatically.
A bank syndicate may have financed substantially all of the company's assets under one umbrella facility.
When the syndicate is refinanced, management has an opportunity to separate assets whose useful lives support their own financing.
A company might have trucks, trailers, manufacturing machinery, CNC systems or other productive equipment that can support dedicated equipment debt.
That prevents a corporate private-credit facility from funding long-life hard assets at a potentially higher cost.
It also preserves corporate debt capacity for acquisitions, working capital and investments without obvious standalone collateral.
Mehmi's Canadian guide to equipment financing and operating lines of credit explains why long-term equipment and short-term operating liquidity should generally be financed through different structures.
Owned equipment may provide another source of capital. Depending on valuations and existing liens, a company may consider an equipment sale-leaseback structure rather than placing every asset beneath the new corporate credit facility.
Before marketing the refinancing, management and its advisers should build a complete picture of the existing syndicate.
That review should cover outstanding term balances, revolver utilization, letters of credit, hedging obligations, prepayment provisions, lender fees, guarantees, collateral, cash-management arrangements, financial covenants, permitted acquisitions, restricted payments, change-of-control provisions and required lender-consent thresholds.
Exact consent mechanics depend on the existing credit documents.
The company also needs current payoff information.
A proposed $120 million private facility may appear sufficient until management discovers several million dollars of accrued interest, breakage costs, hedge termination payments, fees and other closing obligations.
The new sources-and-uses schedule should therefore be built from actual payoff requirements rather than headline principal balances.
Canadian companies reviewing the downside of refinancing can use Mehmi's guide to refinancing risks and costs as a starting point for examining penalties, liens and total-cost implications.
This is one of the most important closing mechanics.
The existing lenders generally will not release their collateral until they receive the agreed payoff. The incoming lenders generally will not fund unless they know they will obtain the collateral position required by their credit approval.
Closing therefore requires coordinated payoff, discharge, registration and priority documentation.
In the United States, personal-property security interests are generally governed by Article 9 of the Uniform Commercial Code as adopted by each state. The Uniform Law Commission describes Article 9 as the statutory framework governing credit secured by personal property and notes that financing statements are filed to publicly disclose security interests.
Canada does not use the UCC.
Most common-law provinces use provincial personal property security legislation. Ontario, for example, states that registering security under the PPSA helps establish priority among competing interests in the same personal property.
Quebec operates under its civil-law system and uses the RDPRM for relevant personal and movable real rights.
These distinctions are one reason a cross-border refinancing requires counsel in the applicable jurisdictions rather than simply copying a U.S. security package into Canada or vice versa.
The lender will care about substantially more than whether the company historically paid its banks on time.
The primary repayment source remains cash flow.
Credit teams will normally reconstruct normalized EBITDA, examine free cash flow after maintenance capital expenditures, review customer concentration, assess working-capital requirements and determine how much leverage the company can carry through a downside scenario.
They will also examine the quality of add-backs.
If management presents $30 million of reported EBITDA but requires $8 million of aggressive adjustments to reach $38 million of "adjusted EBITDA," lenders may not accept every adjustment when calculating leverage or covenants.
The lender will also examine existing assets, subsidiary structure, intellectual property, material contracts, tax obligations, litigation and management depth.
Collateral does not replace repayment capacity.
For Canadian businesses evaluating how much of the new structure should be collateral-backed, Mehmi's secured versus unsecured financing guide provides additional context on how collateral changes underwriting and creditor rights.
Consider a hypothetical U.S. company refinancing USD $120 million of bank commitments. This example is purely illustrative and is not a Mehmi offer, lender quote or representation of available market terms.
Assume the new stack includes an USD $80 million first-lien private-credit facility, a USD $25 million asset-based revolver and an USD $15 million equipment facility.
The private-credit facility is assumed to carry 10.50% cash interest, paid quarterly, with a five-year bullet maturity and a 1.50% upfront financing fee.
At those assumptions, annual cash interest on the $80 million facility would be $8.4 million, or $2.1 million per quarter. The assumed upfront fee would equal $1.2 million. If the facility remained outstanding for the full five years without principal amortization, cash interest alone would total $42 million, before principal repayment, legal expenses, diligence costs or any prepayment premium.
Assume the $25 million ABL facility averages only $15 million drawn and carries an illustrative 9.00% rate on drawn balances. Average annual interest at that utilization would be approximately $1.35 million, excluding unused-line fees, field examinations and other costs.
Finally, assume the USD $15 million equipment facility amortizes monthly over seven years at an illustrative 8.00% fixed rate.
The payment would be approximately $233,793 per month. Total payments over 84 months would be approximately $19.64 million, including roughly $4.64 million of interest, excluding fees and taxes.
Based on those assumptions, first-year scheduled cash debt service would be approximately $12.56 million across the three facilities if ABL utilization remained at the assumed average.
That number matters more than the fact that the company successfully raised $120 million.
Management should test whether the company could still carry approximately $12.6 million of annual financing obligations after an earnings decline, customer loss, working-capital build or unexpected capital expenditure.
Sometimes.
The mistake is assuming that every dollar leaving the bank syndicate must be replaced with another dollar of senior debt.
If the existing bank structure is already near the company's sustainable leverage capacity, adding expensive first-lien private credit may leave little room for an operating setback.
Junior capital can absorb part of the requirement.
Mezzanine debt generally sits behind senior lenders and may use less principal amortization in exchange for higher pricing and greater lender risk. Canadian companies considering this layer can review Mehmi's mezzanine financing guide.
Preferred equity can provide even more balance-sheet flexibility because it may not require scheduled principal amortization, although preferred returns, redemption rights and investor protections can create substantial economic cost.
The goal is not to eliminate dilution at any price.
It is to choose the combination of contractual debt obligations and equity risk that the company can sustain.
Potentially.
A company with strong commercial customers but long payment terms may discover that a significant percentage of its traditional revolver exists solely because cash is trapped in accounts receivable.
An ABL revolver or receivables financing arrangement may therefore be more appropriate than increasing the private term facility.
Canadian companies can compare those options through Mehmi's guide to invoice factoring in Canada.
For a $100 million+ company, factoring is not automatically the preferred answer. Customer notification, concentration, control agreements, existing liens and cost all matter.
The broader lesson is to isolate the actual working-capital problem before deciding which capital source should solve it.
The existing syndicate may mature before the permanent private-capital package is ready.
A bridge facility can potentially close that timing gap.
It should not become the default permanent structure.
The company needs a specific repayment or refinancing path, sufficient collateral or enterprise value and enough liquidity to absorb the bridge's potentially higher cost.
Mehmi's commercial bridge financing guide explains why the exit strategy is central to short-term financing.
A weak permanent financing plan does not become strong merely because a bridge lender is willing to fund first.
Private capital should not automatically replace banks.
Banks can be particularly valuable when a borrower needs competitively priced revolving credit, cash management, international payments, letters of credit, foreign-exchange services and long-standing relationship capacity.
The company may also prefer a bank syndicate if leverage is modest, financial performance is stable and covenant flexibility is adequate.
Private credit is generally more compelling when flexibility, execution certainty or leverage capacity creates enough strategic value to justify the economics.
That calculation needs to be quantified.
If the new private structure costs an incremental $5 million annually but allows the company to complete an acquisition expected to generate materially more sustainable free cash flow, the economics may work.
If management is paying that additional $5 million simply because it dislikes quarterly bank reporting, the refinancing deserves much more scrutiny.
Not always.
A partial refinancing can sometimes produce a stronger result.
For example, the company could refinance the term debt with private credit but retain its bank revolver if the bank is comfortable remaining in the structure.
Alternatively, management may refinance equipment separately, reduce the amount requested from the private-credit provider and leave a smaller bank operating facility in place.
The difficulty is priority.
Senior creditors need to agree on which assets support which facilities and what happens after a default. Intercreditor arrangements can therefore become one of the most important documents in a mixed bank/private capital structure.
The company should solve those priority issues before assuming that two attractive standalone term sheets can automatically coexist.
Institutional lenders expect a lender-ready data room.
Management should have historical audited or high-quality financial statements, current interim results, monthly projections, detailed EBITDA adjustments, a debt and lien schedule, collateral schedules, customer concentration analysis, accounts-receivable aging, inventory reporting, capex requirements, corporate structure, ownership information, material contracts and a detailed sources-and-uses schedule.
The projections should include a downside case.
Management should be able to show not only how the business performs if the strategic plan succeeds, but also what happens if EBITDA declines, receivables slow or expansion takes longer than expected.
If the refinancing is connected to an acquisition, Mehmi's Canadian M&A financing guide provides additional context on building a multi-layer capital stack around transaction risk.
Institutional private-credit managers can participate in transactions above $100 million, but actual capacity depends on the manager's fund size, concentration limits, strategy, borrower credit profile and proposed structure. Some transactions use a single lender while others use several private lenders or co-investors.
It can be. Private lenders may require higher interest, upfront fees or prepayment protection because they are assuming risks or providing flexibility that the bank market will not. The relevant comparison is the total economic cost against the strategic value of the structure, not headline interest alone.
Yes, depending on the borrower and collateral, but management should distinguish between a term facility and revolving working-capital capacity. An ABL revolver may be a better substitute for a bank operating line than drawing an additional private term loan.
The existing lenders generally provide payoff and release documentation, while incoming lenders establish their new security interests. Exact mechanics depend on jurisdiction, collateral and the existing credit agreement. Legal counsel coordinates the release, registration and priority process.
Potentially. A bank may retain an operating or ABL facility while private credit provides term debt. This requires compatible security positions, credit documents and intercreditor arrangements acceptable to each lender.
A company facing limited covenant headroom may benefit from evaluating alternatives before an actual default, when management may have greater negotiating flexibility. Whether refinancing is appropriate depends on liquidity, business performance, existing lender cooperation and the cost of replacement capital.
There is no universal rule. Larger institutional transactions often rely heavily on corporate guarantees, subsidiary guarantees, pledged assets and contractual covenants, but guarantee requirements depend on ownership, structure, leverage and lender policy.
Replacing lower-cost bank debt with a structure that the company's free cash flow cannot comfortably support. More flexible underwriting does not make the debt disappear. Interest, maturity obligations, covenants and refinancing risk still have to work under a realistic downside case.
Mehmi Financial Group acts as a commercial financing brokerage and intermediary, not a direct lender.
For a $100 million+ refinancing, the first conversation should establish what the existing bank syndicate provides, which obligations need to be replaced, how much working-capital liquidity must remain available after closing and which assets can support specialized financing.
If your company is evaluating a bank-syndicate replacement, provide the financing amount, whether the transaction is in the United States or Canada, the state or province, the intended use of funds and required timing.
Call 833-863-4644 or contact Mehmi Financial Group to discuss the proposed transaction.
Financing is subject to third-party underwriting, diligence, lender approval and final documentation. Mehmi Financial Group does not control underwriting or guarantee approval, pricing, leverage or closing timelines.
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