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Amending Identified Problems In A Credit Agreement Crib Sheet Notes

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Amending Identified Problems in a Credit Agreement What is the problem?
Why is it an issue?
Does the issue prevent the borrower from making any of the representations and/or complying with any undertakings in the Agreement?
What amendments will the Arranger want to include (i.e. which CPs to include)?
What amendments will the borrower wish to make?
1) Environmental Contamination of a prospective property acquisition a. Why is it an issue?
a.i. Litigation costs a.ii. Clean-up costs could go into the millions of pounds a.iii. Costs of new valuations or environmental audit a.iv. Might have to close the business for a time whilst the problem is being rectified a.v. Bad publicity a.v.1. Reduce customers a.vi. Value of the property may fall a.vi.1. Lower security for the bank b. Credit Agreement b.i. Litigation pending or threatened b.ii. Financial Projections b.iii. Compliance with laws b.iv. Environmental clause c. Amendments by Arranger (Bank) c.i. New valuation of the property based on the environmental information that has come to light c.ii. Investigation into the costs of clean-up and establishing liability c.ii.1. Do not buy if the cost of clean-up is going to cost more than the value of the property c.iii. Borrower should gain an indemnity from the seller for the costs of clean up c.iii.1. Although it should be noted than an indemnity is only as good as the person giving it c.iv. Insist on insurance, in the event of some liability being proved c.v. Minimise risk to employees c.v.1. Erect a fence to rope or block off contaminated area c.vi. Obtain counsel's opinion as to the success of a defence to a claim d. Amendments by borrower d.i. Negotiate a carve-out relating to particular litigation d.ii. Add a financial threshold d.iii. Add a timescale d.iv. De minimis threshold for Material Adverse Effect d.v. Save as disclosed 2) Dispute with Supplier a. What is it an issue?
a.i. Litigation costs a.ii. May need to find another supplier at a higher price or there may not be another a.iii. May need new goods which could disrupt business and prevent trade continuity a.iv. Supplier might refuse to supply other products to the target a.v. Poor publicity if other suppliers find out that there is a sour-relationship a.vi. Depends on the value of the contract in issue a.vi.1. Will it have a severe impact on the syndicate's decision to lend?
b. Credit Agreement b.i. Litigation pending or threatened b.ii. Default under another contract c. Amendments by Arranger (Bank)

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