Private equity firms have recently been pushing to include "pre-cap" language in financing documents that would limit investors' rights to have their bonds and loans repurchased in the event of a merger or acquisition, according to an article in Leveraged Finance News. Loan agreements commonly include an event of default by which loans mature and commitments can be terminated on a change of control of the borrower. Lenders want the right to re-evaluate the credit if there is a change of control and to have their loans repaid if they choose. Loans are typically repaid at par, while high-yield bonds are usually subject to a prepayment premium under equivalent provisions in indentures on a change of control.

Some private equity firms have recently sought to include "pre-cap" language in their debt deals because it makes a company more attractive to potential buyers if the target's debt remains in place when the sale occurs. Private equity firms believe the "pre-cap" language increases the odds of eventually selling the company for a profit, as buyers would not need to go through the effort and expense of refinancing debt. Creditors have often been rejecting the proposed language but private equity firms will likely continue negotiating to include it in financing documents.

This year, private equity firms successfully included "pre-cap" language in the financing documents for several dividend recapitalizations, a financing where the borrower's private equity owners cause it to raise additional debt so that it can pay the equity holders a dividend. In this way, the borrower's private equity owners can realize some part of their investment without selling the borrower (or in anticipation of a sale at a later date). Some experts believe that bondholders and lenders may be more comfortable with the "pre-cap" language in deals where the company has a significant operating history under private equity ownership.