Administrative Provisions
| Title | Description |
|---|---|
| General Definitions | This nugget highlights the issues you need to be aware of when reading the definitions clause in the loan agreement. It looks at circularity, moving definitions, and uncapitalised definitions, as well as offering suggestions to help unravel the impact of the detail of the definitions in the context of the transaction. |
| Specific Definitions | This nugget looks at the definitions clause and highlights some of the more important definitions. It introduces you to some of the definitions ( such as "Default" and "Financial Indebtedness" ) which have nuggets of their own, as well as explaining other concepts such as "Finance Documents", "Material Adverse Effect" and "Reference Banks". |
| Financial Indebtedness | This nugget focuses on the definition of Financial Indebtedness and explains each part of the definition from the investment grade LMA loan agreement, as well as explaining why a different definition is needed in the financial ratios and in the leveraged loan agreement. It also looks at the concept of title financing and describes some common examples including finance leasing and repos. |
| Drawdown and Repayment | This nugget looks at drawdown and repayment. It focuses on the severability of the lenders' rights and obligations and at what rights that gives to individual lenders; at the mechanics of drawdown and conditions precedent ( particularly where security is required over the financed asset ); at the mechanics of a multicurrency term loan; and at compulsory and voluntary prepayment. |
| Interest - Part 1 | This part of this nugget looks at LIBOR. It explains the difference between LIBOR and base rate, between Euribor and Euro LIBOR, and between a screen rate and a personal rate. It also explains the role of the Reference Banks in setting LIBOR in a loan agreement. |
| Interest - Part 2 | This part of this nugget looks at Interest Periods. It explains the reinvestment risk and broken funding costs, the relationship between broken funding costs and a prepayment fee; splitting interest periods and consolidating interest periods; default interest and penalties; and interest periods in a revolving credit. |
| Additional Costs - Part 1 | This part of this nugget looks at the clauses under which extra costs, over and above LIBOR and the Margin, may be passed on to the borrower. It looks at the market disruption clause, highlighting the difference between a credit problem and a market problem, briefly introduces the increased cost clause ( covered in more detail in Part 2 ) and looks also at the fees and indemnities. |
| Additional Costs - Part 2 | This part of the nugget looks at the increased cost clause. In particular, it looks at the relationship between Basel II and the increased cost clause and at the treatment of additional costs / mandatory liquid assets. |
| Witholding Tax - Part 1 | This part of this nugget deals with withholding tax, the grossing up clause, and double tax treaties. It explains the role of the grossing up clause in allocating change of law risk and the borrower’s need to limit its grossing up obligations in relation to loan transfers. |
| Witholding Tax - Part 2 | This part of this nugget highlights the need to adjust the grossing up clauses to reflect the tax laws of the countries concerned, and to reflect the extent to which the position on withholding tax can be affected by the lenders. It also looks at the clawback clause and its limitations, and the linkage between the tax clauses and other provisions of the loan agreement. Finally, it suggests some protections which the borrower might look for in relation to loan transfers. |