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CF > 7. Intro to Loans > Flashcards

7. Intro to Loans Flashcards

1
Q

What rep is L unlikely to agree shouldn’t be repeated

A

Legal reps

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2
Q

What should rep that info in Info Memo is not misleading be qualified by

A

Not misleading in any material respect

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3
Q

What is the effect of a drawstop

A

Temporary suspension of O to lend

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4
Q

What is a CP to 1st utilisation

A

Before many can be drawn down for 1st time, must comply

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5
Q

What does it mean to place outstanding monies on demand

A

Repayable on notice

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6
Q

What does the interest clause usually state in an LA

A

Floating rate, matching L’s costs, changing after X months

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7
Q

What kind of facility is an RCF

A

Committed, paying off tranches in periods, drawn down multiple times

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8
Q

For which clause should B argue only if reasonable opinion of L + only if ‘will’ have X effect + only for payment Os

A

MAC sweep up clause

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9
Q

Although B will likely have to agree to EoDs applying to whole group, how else to qualify?

A

Through thresholds or grace periods

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10
Q

What will L want MAC EoD to say

A

Refer to ALL Os, not just payment Os, and change ‘will have MAE’ to ‘may’.

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11
Q

Two general UTs

A

Compliance w/ laws and security

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12
Q

How to limit MAC EoD to be more B-friendly

A

Only situations which in the reasonable opinion of L give grounds for belief that WILL have MAE on B complying w/ PAYMENT Os

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13
Q

What are info UTs

A

E.g. to promptly inform of any pending/threatened litigation

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14
Q

Why should no rep refer to ‘Default’ or ‘PEoD’

A

Would deprive B of grace period

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15
Q

Typical GP for non-payment

A

2/3 BD for a technical error

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16
Q

What should be included in definition of Permitted Disposals

A

In ordinary course of business, trading up in quality/value and any disposals up to X limit

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17
Q

How can you qualify Rs&Ws drafting

A

By ref to B’s belief, reasonability, de minimise limit etc

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18
Q

What should insolvency EoD cover

A

Ps in any other J

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19
Q

What is L likely to ask for in return for Waiver Letter

A

Fee and/or increased margin as condition of letter

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20
Q

If CP is not satisfied and compliance not waived, what can L usually do

A

Drawstop

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21
Q

When is a draw stop usually triggered

A

By breaching CPs to utilisation

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22
Q

What method is used for L to waive EoD

A

Waiver Letter

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23
Q

What facility is appropriate to assist w/ cash flow for undefined projects

A

RCF

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24
Q

What should L ensure does not happen when deciding what action to take after EoD

A

Ensure default not waived, or will be estopped from enforcing rights under LA

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25
Q

What facility is appropriate if X sum needed for a medium-long period

A

Term loan

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26
Q

What fundamental UTs generally do not have GPs

A

Financial covenants and negative pledge

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27
Q

Why should commercial reps not be repeated

A

Only relevant up to completion

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28
Q

What remedies does L have outside of LA

A

CL remedies

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29
Q

How to make insolvency EoD more B-friendly

A

Exclude frivolous/vexatious Ps discharged within 14 days

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30
Q

Is there a breach of a representation if untrue between repetitions

A

No, as long as sorted before next repetition

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31
Q

GP for financial covenants

A

No GP as based on historic info, so can’t be remedied

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32
Q

What rate for Default Interest Rate is usually acceptable

A

2 - 3% above base rate

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33
Q

What must any Default Interest Rate be?

A

Genuine pre-estimate of costs incurred as a result of B’s late payment

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34
Q

What is an RCF

A

Cash available in tranches

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35
Q

What is a CP to subsequent use

A

CPs that must be complied with before further drawdon

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36
Q

Why should you still use the definition of Material Subsidiaries, even if no subsidiaries at the moment

A

Minor subs may be created in future

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37
Q

What does it mean to accelerate the loan

A

Demand immediate repayment

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38
Q

How to limit EoD based on MR by B

A

Limit to written reps in docs given to L

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39
Q

Where are L’s options following EoD set out

A

Under ‘Acceleration’ clause

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40
Q

For what clause should B argue only if failure to do X would materially impair ability to comply w/ Os under FDs

A

General UT to comply w/ all laws

41
Q

Why is MAC EoD rarely relied on

A

False triggering means L must compensate B

42
Q

What is a representation

A

Statement of fact about B’s business, certified as true at date of LA + any deemed repetitions

43
Q

Why is CA wording favourable to B

A

L can only act when other L has actually acted

44
Q

For which clause will L likely agree to ‘reasonable opinion’, but argue for ‘may’ have X effect + apply to ALL Os

A

MAC sweep up clause

45
Q

What kind of facility is a term loan

A

Committed, repaid in either instalments or all at once

46
Q

Two things included in pre-existing mandatory pre-payment clause

A

Illegality (for L) and change of control of B

47
Q

Typical GP for Os that aren’t financial covenants or non-payment

A

5 BD if remediable - NOT if fundamental UT

48
Q

Who at L decides from DD whether to loan to B or not

A

Credit Committee

49
Q

Why will L not agree to a grace period once EoD triggered, e.g. in acceleration clause

A

Bc defeats the purpose of EoD

50
Q

Why is CD wording favourable to L

A

Can act when another L entitled to act

51
Q

What may B have to pay if fails to pay monies due under LA by X date

A

Default Interest Rate

52
Q

What is a syndicated loan

A

2+ Ls and borrower

53
Q

Commercial reps that shouldn’t be deemed to be repeated

A

No misleading info in Info Memo

54
Q

2 kinds of CPs

A

To 1st utilisation and to subsequent use

55
Q

three kinds of UTs & covenants

A

Info, financial and general

56
Q

Three examples of reps which usually have UT/indemnity elsewhere, so not deemed to repeat

A

Tax gross-ups, stamp taxes, authorisations

57
Q

Who will L want EoDs to refer to

A

Whole Group

58
Q

What should there be no ref to in the EoD clauses

A

Illegality for L to lend

59
Q

Three kinds of facility

A

Overdraft, term loan and revolving credit facility

60
Q

What two kinds of loan can B have - in terms of parties involve

A

Bilateral or syndicated

61
Q

Why should legal reps not be repeated

A

Won’t change

62
Q

Three options L usually has in EoD

A

Can cancel O to lend, accelerate, or place outstanding monies on demand

63
Q

What three things should you ensure B can have, as part of general UT not to dispose/give security over assrts

A

Permitted Security, Permitted Disposals and Minor Disposals

64
Q

Example of de minimise threshold on creditors’ process EoD clause

A

£50k on £15m loan

65
Q

What is the ‘material adverse change’ EoD

A

A catch all clause

66
Q

What should the Waiver Letter refer to

A

Particular EoD only

67
Q

What is creditors’ process

A

Other creditor seizing assets

68
Q

How should you define Material Subsidiaries

A

5 - 10% of Group turnover or by ref to 5 - 10% of Group’s NAV

69
Q

Downside of giving UTs

A

Time-consuming due to admin involved

70
Q

What can you build in to CD clause to make it more B-friendly

A

De minimise threshold of e.g. 3% of loan

71
Q

What clause in LA sets down purpose of loan in very vague terms

A

Purpose clause

72
Q

What CD wording is B unlikely to get L agree to remove, even if CA wording included

A

EoD when other L entitled to accelerate

73
Q

How should you qualify general UT to comply w/ laws

A

B + MS to comply w/ all laws if failure would materially impair ability to perform Os under Finance Docs

74
Q

What are UTs and covenants

A

Promises (not) to do something

75
Q

How should you try to restrict the obligations, in terms of who they apply to

A

B only or B + Material Subsidiaries

76
Q

Why include info UT to inform L of Ps

A

To make L aware prior to next rep being made

77
Q

How to make creditors’ process EoD more B-friendly

A

De minimimis threshold + discharged within 14 days

78
Q

What might L do if there is an availability period in which B can borrow money

A

Charge commitment fee

79
Q

What is the ‘Drawdown Period’ in an LA

A

Availability period to draw down tranches in RCF

80
Q

What kind of facility is an overdraft

A

On-demand, uncommitted

81
Q

What kind of facility is a hybrid between overdraft and term loan

A

RCF

82
Q

What three docs make up the Finance Docs

A

LA, Debenture/security doc, and any ancillary docs

83
Q

What facility assists with cash flow by making X amount of money easily accessible

A

Overdraft

84
Q

What reps should not be deemed to be repeated

A

Legal reps, anything for which there is UT/indemnity, commercial reps and any ref to PEoD

85
Q

How could you qualify ‘no litigation’ R&W

A

No litigation which might reasonably be expected to have MAE to best of B’s knowledge has been threatened (N/A frivolous/vexatious) against B/Material Sub

86
Q

Where should illegality be dealt with

A

Pre-existing mandatory prepayment clause

87
Q

What is a term loan

A

X lent for X time

88
Q

When should Waiver Letter be obtained and why

A

Prior to entering GP to avoid triggering CD of other LAs

89
Q

What should be included in the definition of Permitted Security

A

That existing at time of agreement + future security w/ consent - set out in Schedule

90
Q

How to draft CPs to enable L to waive compliance

A

State to be in ‘form and substance satisfactory to L’

91
Q

What is the benefit of EoD clause for L

A

Avoids L having to litigate

92
Q

What are financial covenants

A

Promises to meet specific financial targets

93
Q

Why is an overdraft not for big projects - where lots of money required

A

On-demand - can be called in at any tim

94
Q

What is a bank balancing when entering into a loan

A

Goodwill w/ customers against credit risk

95
Q

What should the definition of Minor Disposals be

A

1% of value of either loan or C’s assets

96
Q

What is an overdraft

A

Borrow up to X for % daily interest

97
Q

Why is the security doc separate from LA

A

For privacy, as security doc has to be registered at ch

98
Q

When do UTs and covenants apply

A

Every day throughout the loan

CF (11 decks)

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