The Credit Documentation Suite

The Credit Documentation Suite

Belinda Green

30 years: Credit risk specialist

Documentation formalises the lending, borrowing and security arrangements between the parties, details the borrowers’ and issuers’ obligations and provides lenders and investors with the legal recourse in the event of default. This video explores some typical forms of documentation that parties enter into when issuing debt.

Documentation formalises the lending, borrowing and security arrangements between the parties, details the borrowers’ and issuers’ obligations and provides lenders and investors with the legal recourse in the event of default. This video explores some typical forms of documentation that parties enter into when issuing debt.

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The Credit Documentation Suite

6 mins 54 secs

Overview

Documentation formalises the lending, borrowing and security arrangements between the parties, details the borrowers’ and issuers’ obligations and provides lenders and investors with the legal recourse in the event of default. This video explores some typical forms of documentation that parties enter into when issuing debt.

Key learning objectives:

  • What are the main types of documentation that parties enter into

  • Understand what each of these documents are and features of each of these

  • Be able to understand how documentation depends on nature of transactions and are standardised

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Summary

What are typical documentation used by parties when issuing debt?

The commonly used documents that parties use are:

  • Commitment letters
  • Facility agreements
  • Security documents
  • Bond indentures
  • ISDA documentation
  • Intercreditor agreements
  • Common terms agreements

What are the features of each of these documents and why are they needed?

Commitment Letters - Documents the basic T&Cs of the proposed facility, subject to negotiation and conclusion of satisfactory documentation. They come with an expiry date, called a ‘drop dead’ date, between 30 – 180 days from issue date and are not binding on either party.

Facility Agreements - Also known as the loan agreement and it contains all theT&Cs required to document the transaction. It is legally binding on all the signatories to the agreement. 

Security Documents - Depends on type of transaction but usually includes documents such as mortgage agreement or pledge document or a guarantee agreement. Security documents are also legally binding on all parties.

Bond Indenture - It is a legally binding document detailing the terms and conditions of the bond, including covenants and events of default

ISDA Documentation -  The standard documentation published by the International Swaps and Derivatives Association (ISDA) and is only applicable if the lender and borrower enter into derivative arrangements. Any derivative contract will be documented according to an ISDA master agreement (contains the standard terms and conditions), a schedule (contains specific negotiated terms ) and the confirmation (contains the basic commercial terms of the trade)

Intercreditor Agreements - A document entered into between a group of bilateral lenders and the borrower. Used when a number of lenders have each provided bilateral lending facilities to the borrower, but may share a pool of collateral, or want to ensure the same T&Cs across all the bilateral facilities.

Intercreditor Agreements usually govern

  • The role and responsibilities of the security trustee
  • The pool of assets comprising the shared collateral
  • The ranking and priority of each lenders’ claim on the assets and cash flows
  • The effect of any insolvency event
  • The process for enforcement of security
  • The responsibilities of the various lending parties

Common Terms Agreements -  Goes along with intercreditor  agreements and it contains all the T&Cs that will apply across all relevant documentation

Which documents are appropriate for each transaction and how are they standardised?

Choice of documentation depends on the type of transactions. For a secured term loan from a bank, the documentation suite usually includes a facility agreement, a mortgage document and a fee letter. Documentation is highly standardised as banks in EMEA and APAC have adopted the templates provided by the Loan Market Association to document their bilateral lending facilities.

 

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Belinda Green

Belinda Green

Belinda Green is a credit risk specialist, with a career spanning 4 continents and numerous sectors. She has spent over 20 years in commercial and corporate lending roles for FirstRand Bank and UBS, where she was director of Corporate Lending from 2002 until 2013. Belinda shifted into education in 2014 and was a Faculty Lead and Senior Trainer for Moody’s Analytics Learning Solutions in Dubai for over 5 years, leading and delivering training programmes across the Middle East and Africa. In 2019, Belinda launched her own training consultancy in London, delivering learning solutions to clients around the world.

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