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Bond Prospectus V Facilities Agreement Notes

LPC Law Notes > Finance and Capital Markets Notes

This is an extract of our Bond Prospectus V Facilities Agreement document, which we sell as part of our Finance and Capital Markets Notes collection written by the top tier of Cambridge And Oxilp And College Of Law students.

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Banking WS 9

Comparison Bond Agreement

Prospectus

Bonds Many lenders who can get in and out (don't Also, see think of themselves as lenders but as investors) WS (8) Simpler Terms note on Less onerous rules Little monitoring Debt Rarely Secured Securitie No relationships (it's just a business s p.1 for relationship) compari Established Market Large scale borrower Lots of Publicity

TERM

Facilities

Bank Loan Few lenders Complex terms Onerous rules Closely monitored Often secured Relationships (Stronger relationship with Bank)

BONDS PROSPECTUS Generally a Less Onerous Negative Pledge

1. typically prohibits any further "indebtedness", so check the definition of indebtedness.

2. Is there a "discretion"? Who exercises it? How

3. If further indebtedness is allowed, what conditions are there?
- Typically requires that Co. grants equivalent security to new debt and current bonds.

Limited market Modest borrower Little Publicity

FACILITIES AGREEMENT

More Onerous Negative Pledge

1. Granting security over any future

debt is prohibited. The lender is protecting itself. This is usually a wider NP and cover any indebtedness, not just ones listed Why Include the NP?
in the agreement.
- This is important because it means
- The lender's primary aims is the current issue will not be to make sure they are not devaluated by a later one and will pari passu with/subordinate remain tradable (otherwise earlier to anyone. bonds would lose value and everyone

2. FA may contain provisions on would want to purchase the new ones sale and leas-back that have the that ranked higher) effect of creating security. This is
- the NP It is included to ensure that not usually covered in a bond the issuer will not issue debt prospectus. securities ranking higher than the current issue, unless the bondholders of this current issue receive identical rights.
- The NP is included to protect the current bondholders' position with respect of future bondholders taking better security over them.
- However, watch out for the defined terms as it may include authorising taking security over the assets by certain types of organisations (e.g. like a bank) Effect: Bonds will rank equally with any new ones that are granted so,

NEGATIVE PLEDGE P.233

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