Term Sheet USPP

Question 0

List Events of Default (examples)

Answer 0

1. Principal or Make whole amts
2. Interest
3. Financial Covenants
4. Other covenants,
5. Reps & Warranties
6. Cross default(can stipulate an amt, across subsidiaries)
7. Insolvency
8. Final Judgments
9. Guarantee
10. Change of control

Question 1

Key features on Term Sheet include

Answer 1

Issuer, Issue & Amt, Guarantor, Series & Maturity, Price (normaly <par) Ranking (eg pari passu), Interest rate, Closing & take down of funds (eg T+5), Use of Proceeds, Mandatory or Optional Redemption of Principal, Withholding Tax, Financial Reporting commitments, Inspection, Affirmative Covenants, Negative Covenants, Representations & Warranties, Events of Default,

Question 2

Reps & Warranties

Answer 2

1. Need more R&W in bond than bank deal
2. In a bank, every time the debt is rolled over will need to restate.
3. Examples: due organisation, disclosure, financial statements, title to properties, no tax withholding etc

Question 3

Negative Pledge

Answer 3

1. Negative Pledge is a negative covenent (ie will not do…)
2. Will not grant a lien, encumbrance on/over property unless the notes are equally and ratably secured
3. Can stipulate a number / proportion beyond which cannot encumber - this is a carve out.

Question 4

Sale of Assets

Answer 4

This is a dividend blocker to stop directors receiving divs from asset sales leaving just debt holders.

Question 5

Negative Covenants

Answer 5

Will not do:

1. Transactions with affiliates
2. Merger / consolidation
3. Negative pledge (will not encumber without checking etc)
4. Sale of Assets

Question 6

Affirmative Covenants

Answer 6

Will do:

1. Compliance with law
2. Insurance
3. Maintenance of properties
4. Payment of taxes and claims
5. Corporate existence
6. Pari passu ranking (Company ensures notes rank pari passu at all times)

Question 7

Financial Reporting includes

Answer 7

1. Half Year financial INfo, annual financial info
2. COmpliance certificates
3. AUditors opinion
4. Information delivered to exchanges
5. Notice of default

Question 8

Make Whole Amount (under Optional Redemption of Principal)

Answer 8

Amt equal to the excess of all scheduled payments: PV of all P & I pmts remaining minus the principal amount being redeemed, discounted at the reinvestment yield.
Would do the Make Whole if could finance cheaper

Question 9

Intercreditor deed

Answer 9

Allows protection to investors lower in capital structure

Question 10

Definitions:
Delayed Takedown feature
General corporate purposes

Answer 10

1. extend the taking down of funds

2. general corporate purposes is important, in case the original purcpose does not proceed