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About the course
This course deals with the structural and commercial side of loan agreements and will give delegates the opportunity to developed their skills and understanding when analysing key credit documents.
The course will cover a substantial range of topics including the distinction between loans and bonds, provisions in credit protection, key clauses in the loan agreement, the loan agreement in different commercial contexts and legal issues that arise in financing transactions.
The course is also useful for those with practical experience but who have not previously had any formal in depth training on the agreements, to help them fill in the inevitable gaps in their understanding and to give them a framework in which to consolidate their practical skills and knowledge. It is also useful as a refresher for more seasoned practitioners.
DURING THIS COURSE YOU WILL:
- Be guided through the essential elements of various loan transactions
- Appreciate how to avoid the conflict between representations, conditions precedent, undertakings and events of default
- Discuss a variety of issues and comments on the loan agreement which are commonly raised by borrowers
- Improve your knowledge of other common financing documents including a contract assignment and a subordination agreement
- Be able to negotiate key clauses in a financing package
- Understand the continuing issues surrounding and impact of the post-financial crisis world in relation to credit documentation
How You Will Learn
You will cover:
Role and influence of LMA Documentation; General approach to the Loan agreement; Key contractual provisions in credit protection; protecting against value leakage; The LMA primary loan senior facility agreements; Interest & fees; Covenants; MAC/MAE
With practical exercises including ; Comparing loan and bond documentation as prepared by a city firm; Analysing permitted payments and undertakings from mezzanine creditors; Analysing various clauses found in documents produced by Magic Circle City firms
Introduction to the Firm and LMA Precedents
Introduction to the legal structure key debt products
- loans and bonds
- why is the documentation different?
- where do the products overlap?
- introducing the High Yield Bond
Comparing loan and bond documentation as prepared by a City firm
Role and Influence of LMA Documentation
- Key Finance documents
- Senior Facility Agreement (“SFA”)
- Security Documents
- Mandate Letter
General Approach to the Loan Agreement
The concepts behind subordination and intercreditor arrangements:
- what is an Intercreditor Agreement/Deed?
- intercreditor Deeds vs. Deeds of Priority
- parties to the Intercreditor Agreement
- what do Intercreditor Deeds contain?
Practical tips on how to read the SFA and identify the key areas
The concepts behind subordination and intercreditor arrangements
- controlling cash flows
- rights of enforcement and recovery
- what is pari passu and does it matter?
The impact of the search for liquidity on debt structures
The facility agent & security agent – key lessons from the Stabilus case
Analyzing permitted payments and undertakings from mezzanine creditors
Key Contractual Provisions in Credit Protection
- credit insurance and credit derivatives
- risk-based pricing
Getting the credit risk right in the documentation
Equality amongst investors
- secured vs unsecured lenders
- is your initial credit position protected against new investors?
Types of security
- The main covenants per the LMA
- Use and application; pros and cons of the various financial covenants
Analysing various clauses found in documents produced by Magic Circle City firms
Protecting Against Value Leakage
- what are Financial Covenants?
- maintenance covenants
- incurrence Covenants
- balance sheet gearing
- leverage ratio
- interest cover
- fixed charge cover ratio and minimum net worth
- notification on Default
Events of default
- what an Event of Default is
- why these provisions are essential
- how Events of Default differ from Breaches
- consequences of Default
- key Drafting Points
- key Negotiation Points
- Material Adverse Effect (MAE)
- Cross Default Clauses
- Equity Cures
What to look out for when considering amendments and waivers
Involving reviewing clauses pertaining to the topics covered above
The LMA Primary Loan Senior Facility Agreements
- Scope of the Loan
- “The Restricted Group” – where and why it matters
- “Permitted baskets” what they are and why they matter
Interest & Fees
- Arrangement fees
- Commitment fees
- Use and interaction with hedging (SWAPS)
- Default vs. events of default and cross default
Covenants generally (in the context of LMA)
- General undertakings (the negative pledge & guarantor coverage test)
- Financial Convenants
Impact of the Urvasco Case
Monica is a Category A practising Solicitor, Chartered Accountant and Member of the Chartered Institute of Securities and Investment, with over 30 years’ experience in international banking transactions. She was in-house Counsel with S.G.Warburg & Co. (now part of UBS) and was subsequently H...
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