Undertakings Loan Agreements

For more information on the Cannais provisions of facilitated contracts, visit the Loan Markets Association or the Association of Corporate Treasure. This article provides an overview of key clauses in loan agreements and other facility agreements. It also examines the points to be considered in negotiating representations, pacts and payments from the perspective of the borrower and lender. Representations and guarantees are similar in all facility agreements. They focus on the borrower`s legal capacity to enter into financing agreements and the nature of the borrower`s activity. They will often be broad and the borrower may try to limit them to issues that, if not correct, would have a significant negative effect. This qualification may apply to a large number of insurance and guarantees relating to the borrower`s activities (for example. B litigation, environmental and accounting matters), but will probably not be acceptable to the lender in order to limit the borrower`s ability to enter into financing agreements or with respect to important financial information. The majority of the agreements, as noted above, serve to play an economic role in ensuring that the relationship between the borrower and the lender is not compromised. The agreements control the actions that the borrower`s administration can take: Who have the potential to influence the lender`s interest rates.2 Thus, restrictions. B mergers and acquisitions are introduced so as not to alter the borrower/group with which the lender contracts, restrictions on the granting of loans/guarantees and the payment of dividends are also introduced to control the money the borrower pays to persons other than the lenders under the agreement. Representations and guarantees: these should be carefully considered in all transactions. It should be noted, however, that the purpose of insurance and guarantees in a facility agreement differs from its purpose in purchase and sale contracts.

The lender will not attempt to sue the borrower for breach of representation and guarantee – instead, it will use an infringement as a mechanism to call a default event and/or ask for repayment of the loan. A disclosure letter is therefore not required with respect to insurance and guarantees in the facility agreements. In addition to the above remedies, the borrower`s non-compliance with a commitment is generally a delay in the loan agreement. When a delay event occurs and continues over a specified period of time (i.e., beyond the additional time), the loan is due immediately and is due at the lender`s request. The events of default can be: commercial representations are representations of the financial reality and the economic position of the borrower in the market. They are used by lenders to assess the borrower`s ability to repay the loan. The business returns that a borrower is required to make may include confirmation that the borrower`s tax returns are up to date; that the financial information provided to lenders is accurate and accurate in all the details and that the borrower`s satisfaction with the lender (either through the implementation of the security interests provided by the borrower or by other means) would be a priority. If a loan of $50,000 has been granted and these costs represent a small portion of that capital, they may well be enforceable as damages liquidated under the contract. However, if the fee is $20,000, that would be extravagant compared to the main loan amount. Therefore, it would probably be considered unenforceable as liquidated damage. Interest is payable at the end of each interest period, interest periods may be fixed periods (usually one, three or six months) or the borrower can choose the interest period for each loan (the options are usually one, three or six months).