Loan Documentation Curriculum

STAGE 1 GENERAL INTRODUCTION AND ADMINISTRATIVE PROVISIONS

PART 1 INTRODUCTION

  • Lesson 1 A Company’s Overview      Debt v equity; capital markets v loan markets; loan agreement structure
  • Lesson 2 Structural Subordination      What is it; what impact does it have on loan undertakings; use of upstream guarantees and locations for due diligence

PART 2 ADMINISTRATIVE PROVISIONS OF THE LOAN AGREEMENT

  •  Lesson 1 General Definitions      Including circularity; moving definitions; uncapitalised definitions; and avoiding the traps
  • Lesson 2 Specific Definitions      Including Finance Documents, Material Adverse Effect and Reference Banks
  • Lesson 3 Financial Indebtedness      The definition explained including  title financing  such as finance leasing and repos
  • Lesson 4 Drawdown and Repayment      Lenders’ rights and obligations; conditions precedent; multicurrency mechanics and prepayment

Stage 1 In Depth or Key Facts Quiz

 

STAGE 2 INTEREST, REPRESENTATIONS AND REPEATING REPRESENTATIONS 

PART 1 INTEREST

  • Lesson 1 Interest rates and funding costs - base rate, central bank rates, basel III liquidity ratios and funding costs
  • Lesson 2 LIBOR Screen rate, base rate, Reference Banks and the future of LIBOR
  • Lesson 3 Interest Periods Broken funding costs, default interest and penalties and interest periods in revolving credits
  • Lesson 4 Additional Costs Part 1 The cost of funds and market disruption clauses
  • Lesson 5 Additional Costs Part 2 The Increased Costs clause
  • Lesson 6 Withholding Tax Part 1 Withholding tax, grossing up, double tax treaties, gross up and loan transfer, FATCA
  • Lesson 7 Withholding Tax Part 2 Risk allocation, the clawback clause and loan transfers

PART 2 REPRESENTATIONS AND REPEATING REPRESENTATIONS

  • Lesson 1 Representations Obligors and Group members;  role of representations in risk allocation;  litigation, pari passu, litigation and breach of contract representations
  • Lesson 2 Repeating Representations Hazards, and discussion of which representations to repeat

Stage 2 Key Facts or In Depth Quiz

 


 

STAGE 3 UNDERTAKINGS AND INTRODUCTION TO EVENTS OF DEFAULT

PART 1 UNDERTAKINGS

  •  Lesson 1 Information Undertakings GAAP and IFRS, frozen and moving GAAP provisions, Auditors’ certificates and other information undertakings, including the obligation to notify of a Default
  • Lesson 2 General Undertakings including the negative pledge and the no disposals clause
  • Lesson 3 Financial Covenants Part 1  - relationship with the material adverse change and cross default clauses; review of  interest cover, leverage and cash flow ratios
  • Lesson 4 Financial Covenants Part 2  gearing, liquidity, Tangible Net Worth and Capital expenditure
  • Lesson 5 Scope of the Agreement Group members, Obligors and Excluded Companies; change of ownership or control of the Company.

PART 2 INTRODUCTION TO EVENTS OF DEFAULT

  • Lesson 1 Events of Default - The Big Picture  Objective versus subjective Events of Default; scope of the agreement; robustness, particularly in view of the cross default clauses, and Events of Default outside the Borrower’s control
  • Lesson 2 Events of Default – Purpose and Mechanics The role of the Events of Default in; allocating risk, and in giving the Lenders leverage; automatic and non automatic Events of Default;  Borrower’s right to remedy an Event of Default which has occurred; and Events of Default and default interest
  • Lesson 3 Events of Default – Purpose and Mechanics Part 2  Defaults and Events of Default; “Rollover Loans” in a revolving credit facility; effect of disputed Event of Default on acceleration

Stage 3 In depth or Key Facts QuizCompulsory Report

 

STAGE 4 EVENTS OF DEFAULT AND BOILERPLATE 

PART 1 EVENTS OF DEFAULT

  • Lesson 1 “Breach of Contract” Events of Default  non payment, failure to meet financial ratios, breach of undertaking and misrepresentation
  • Lesson 2 Other General Events of Default  insolvency, litigation, change of control and illegality
  • Lesson 3 Cross Default  purpose; spiralling effect; cross default v cross acceleration; ways in which the borrower may seek to reduce the impact of the clause
  • Lesson 4 Material Adverse Change – Arguments for and against
  • Lesson 5 Material Adverse Change – Wording

PART 2 BOILERPLATE

  • Lesson 1 The Agent’s Role and the “Boilerplate” fiduciary duties; exclusion clauses, other “boilerplate” clauses, including the pro rata sharing clause, the anti estoppel clause, the jurisdiction clause, and the clause dealing with waivers and amendments
  • Lesson 2 Transfer Methods  assignments, novations, subparticipations (funded and risk) and credit derivatives
  • Lesson 3 Transferring Secured Loans The options for structuring secured syndicated loans
  • Lesson 4 The Transfer Clause Borrower concerns; “yank the bank”; confidentiality

PART 3 GENERAL

  • Defaulting Lenders - addressing issues which arose during the financial crisis of 2008