Loan Documentation School

Day 1

Introduction

• The most common structures of loan transactions
• Single banks and syndicated loans
• Term loans and revolving credit facilities
• Single currency and multi-currency facilities
• Loan and guarantee facilities
• Secured and unsecured facilities

Pre-Contractual Issues

• What issues should it address?
• How much detail should it contain?
• Is it intended to create a binding legal commitment?

Risk free rates and LIBOR transition

This session will involve consideration of risk free rates and the transition from LIBOR

Withholding Tax

Here we will look at withholding tax, double taxation treaties, and the consequences for the loan documentation.

Overview and Administrative Provisions

This session will involve an overview of the loan agreement and how it is structured to protect the lender, and an examination of the "mechanical" provisions of a typical loan agreement, such as the payments clause and the procedures to be followed on drawdown.

• Drawdown procedures
• Repayment and prepayment

Representations

• Participants will consider the purpose of the representations. Typical representations will be considered, including common comments from either side.

Day 2

Repeated Representations

We will review the homework, the impact of repeating representations, and the interrelations between different parts of the document, both in a term loan and in a revolving credit.

Undertakings and Events of Default

Typical undertakings and events of default will be discussed, including:

• Financial covenants
• Pari passu
• Negative pledge
• sanctions
• Cross default
• Material adverse change
• “Default”

Glossary of Terms

Participants discuss the meanings of common terms used in this field

'Boilerplate' Provisions and Loan Transfers

• Set-off clause
• Indemnities
• Agency clause
• Pro-rata sharing clause
• Loan transfers
• Novations
• Assignments
• Sub participations
• Credit Derivatives

Day 3

Workshop

Calculate the likely recoveries of different classes of creditors in a winding up

Key features of a security document

Workshop – application of funds clauses

Impact of security on the documentation and on the transaction process

Different types of security will be considered, including:

• Liens
• Pledges
• Charges (fixed and floating)
• Mortgages
• Title as an alternative

Guarantees

• The important provisions of a typical guarantee will be examined as will:
• Commercial benefit and transactions at an undervalue
• Common provisions of a guarantee
• Similar instruments such as indemnities, standby letters of credit and advance payment bonds

Day 4

Review of Key Loan Agreement Issues

• “Relevant Companies”
• Default, Events of Default and remediable Events of Default
• Conflict between representations, conditions precedent, undertakings and events of default
• The pari passu clause
• The negative pledge
• The cross default clause
• The material adverse change clause
• “material”, “reasonable” worth the debate?
• Grace periods
• Prepayment events
• Subjectivity and control in the context of events of default
• Comparison of asset finance, corporate finance and project finance based loan agreements

Day 5

Workshop

Participants will consider a number of borrower’s comments on the Loan Agreement. This exercise will highlight key topics within Representations, Undertakings, Events of Default, and Boilerplate, including

• Repeated Representations
• Negative Pledge
• No Disposals
• Cross Default
• Material Adverse Change
• Transferability

Key Legal Issues

• Governing law and jurisdiction
• What courts have jurisdiction to deal with disputes in an international context? What law will they apply?

Clawback/unenforceability

In what circumstances might obligations be avoided or become unenforceable?

• Financial assistance
• Ultra vires
• Commercial benefit
• Preferences
• Transactions at an undervalue
• Registration
• Penalties
• Administration
• Interference with contracts
• The role of the legal opinion
• Subordinated debt and subordinated security
• Different methods of subordination of debt
• The issues to be addressed by an intercreditor agreement