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Direct lenders are offering acquiring sponsors an opportunity to upsize portable debt with an extra delayed-draw term loan (DDTL) in an attempt to stand out from the crowd in an increasingly competitive market.

The move means that incoming sponsors can use the DDTL to increase the portable debt package without the need to renegotiate the terms with lenders.

“Introducing the DDTL concept, where it makes sense, is a tool for direct lenders who want to retain exposure to loans that they like,” said Ashwin Krishnan, head of Morgan Stanley’s North America private credit platform.

The provision comes as private credit firms compete among themselves and with the broadly syndicated loan market to win deals and keep prized assets on their books. So far, the pitch has been limited to predominantly upper middle market companies, sources said.

One example of a deal that includes such a DDTL is Harvest Partners and Neuberger Berman-backed Yellowstone Landscape, sources told 9fin. As of last year, Yellowstone had a portable debt facility that includes a DDTL that could be funded to upsize the debt to support an acquisition of the company, they added.

Harvest, Neuberger, and Yellowstone did not respond to requests for comment.