This section contains the insurance and guarantees, commitments and delays that apply to each facility. It will also contain provisions that protect the bank from any change in circumstances that may affect its lending activities. Any positive commitment that the lender`s facility will always prevail over the borrower`s other debts may be rejected, as this is not always under the borrower`s control. A negative agreement that the borrower does not take steps to influence the order of priority of the facility may be an acceptable alternative. A loan contract is the document in which a lender – usually a bank or other financial institution – sets out the conditions under which it is willing to provide a loan to a borrower. Loan contracts are often referred to by their more technical name, “easy agreements” – a loan is a bank “facility” that the lender offers to its client. This guide focuses on the most common conditions of an easy agreement. Guarantees and guarantees should only be valid as long as the funds are returned to the lender or the lender is required to provide loans, and all insurance and guarantees applicable to the original information (. B for example, the business plan or the accountants` report) should not be repeated throughout the life of the facility. Mandatory costs: This formula, which deals with the costs incurred by banks to meet their regulatory obligations, is rarely negotiated. It is made available as a timetable for the agreement of the institutions.
However, the interest rate should only apply to libor facilities and not to basic interest facilities, since a bank`s basic interest rate already contains an amount corresponding to the mandatory costs. 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. Finally, an agreement on union facilities will contain many provisions concerning a bank of agents and its role. These will often not be of immediate importance to the borrower, but it should consider whether the agent bank can only be replaced by its consent and that the agent bank has sufficient powers to act autonomously to give the borrower the flexibility it needs. A borrower does not wish to obtain the agreement or waiver declarations of a large consortium of lenders.
Some of the key definitions that appear in each agreement are that special attention should be paid to all “default cross” clauses that have an impact when a failure in one agreement triggers one standard below another. These should not apply to on-demand facilities provided by the lender and should include thresholds defined accordingly. Borrowers: The definition of the borrower includes all group companies that require access to the loan, including revolving credits (flexible credits as opposed to a fixed amount repaid in increments) or the working capital component.