Private equity firms add AI disruption clauses to buyout loans
Private equity firms are now building AI disruption clauses into their buyout loans, giving companies some breathing room if artificial intelligence suddenly shakes up their business.
Think of it like a safety net: if AI causes unexpected trouble, these clauses let companies delay default penalties.
H.I.G. Capital recently used this approach in its $524 million deal with Germany's Terras Group.
Lenders fear weakened safeguards
Not everyone's thrilled, though. Lenders are concerned these new rules might weaken the usual safeguards they rely on, like the standard 30-day grace period for missed payments.
Since AI disruptions can be unpredictable and messy, lenders fear longer delays and more uncertainty.
In fact, Bain Capital dropped similar clauses from its $5.3 billion Volkswagen Everllence deal after pushback from lenders.