Advanced Credit Documentation

IFF Training

How long?

  • 2 days
  • in person

IFF Training

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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

Agenda

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

EXERCISE

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

EXERCISE

Analyzing permitted payments and undertakings from mezzanine creditors

Key Contractual Provisions in Credit Protection

Methods used

  • credit insurance and credit derivatives
  • tightening
  • diversification
  • 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

General approach

  • The main covenants per the LMA
  • Use and application; pros and cons of the various financial covenants

EXERCISE

Analysing various clauses found in documents produced by Magic Circle City firms

Protecting Against Value Leakage

Financial covenants

  • what are Financial Covenants?
  • maintenance covenants
  • incurrence Covenants

Financial Ratios

  • balance sheet gearing
  • leverage ratio
  • interest cover
  • fixed charge cover ratio and minimum net worth

Operational covenants

  • insurance
  • notification on Default
  • consents
  • licences
  • laws
  • information

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

EXERCISES

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)

  • Information
  • General undertakings (the negative pledge & guarantor coverage test)
  • Financial Convenants

MAC/MAE

Impact of the Urvasco Case

Experts

Monica Bond

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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Advanced Credit Documentation at IFF Training

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