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Ws 3 Prep Task And Ws Tasks Notes

LPC Law Notes > Finance and Capital Markets Notes

This is an extract of our Ws 3 Prep Task And Ws Tasks 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 Workshop 3

Consolidation note

1. In this workshop we reviewed 7 clauses from the Facility Agreement and considered the Bank's and the Borrower's point of view.

2. When going over the clauses: i. Beware of repeating representations (this is with reference to the No Default, the No proceedings pending or threatened and the Title clauses. They are repeated here and this affects the position of the Borrower whilst giving the bank more security) ii. Never give a repeating representation that there is "default" or "potential events of default" (in our case, the No Default clause is a repeated representation which was unqualified and extremely broad. It was necessary to change "default" for "event of default" which is the industry standard. Similarly, if the clause had read "potential events of default" it would have been necessary to replace this with "event of default". This is a way to protect the borrower from very broad representations. See p.51+p.96). iii. Watch out for the words Would or Might and replace with "WILL" iv. Apply a "De minims" to clauses like "litigation clause" (i.e. use it to qualify the clause) v. Qualify and give Materiality to clauses vi. Limit the liability of the borrower by stating the "reasonable knowledge or belief" vii. Carve-out (i.e. exclude) any claims (this is beneficial to the borrower) viii. Beware of undertakings that restrict how the borrower operates

Prep task and Workshop task Instructions Your task is to prepare for forthcoming negotiations. You are to prepare notes such that your supervising partner may be fully informed of all arguments and that may be stances taken by either party.

1. You are to review the following provisions: (a) introductory wording to Clause 18; This clause is not controversial. (b) Clause 18.8 (No default);

18.8(a) Borrower's view: This is a clause that is too wide as it refers to "No Default. The industry standard is "event of default" not "default". The representation should refer to "event of default" and not the LMA definition of "default" or "potential event of default"(P.51).
- Borrower will also want to negotiate the definition of Material Adverse Effect. In this case, a this is the "opinion of the Agent". The "Agent" is Danton and it holds 33% of the rights. Danton wants to keep the privilege to decide and not be subject to the rest of the banks. However, it is likely that the Borrower will want the "reasonable opinion of the majority of the banks" and not just the "Agent". This is unlikely to succeed.

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