Loan Facility Agreements II

Loan Facility Agreements II

Belinda Green

30 years: Credit risk specialist

In the last video, Belinda explained the typical contents of a loan agreement, starting with the definitions, representations and warranties, conditions precedent, information undertaking and covenants. In this video, she covers the terms and conditions put into an agreement for when things don't go according to plan.

In the last video, Belinda explained the typical contents of a loan agreement, starting with the definitions, representations and warranties, conditions precedent, information undertaking and covenants. In this video, she covers the terms and conditions put into an agreement for when things don't go according to plan.

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Loan Facility Agreements II

8 mins 2 secs

Overview

While the categories in loan agreements are relatively standard, the contents will vary according to the nature of the lending product, the level of credit risk facing the lender, the relative ability of the parties to negotiate terms in their favour, and regulatory and internal risk management requirements.

Key learning objectives:

  • Outline the terms and conditions in a loan agreement

  • Understand what leads to an event of default

  • Define transferability

  • Understand the difference between governing law and jurisdiction

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Summary

What leads to an event of default?

Failure by the borrower or any other obligor to comply with the covenants stipulated in the facility documentation leads to an Event of Default, giving the lender the legal right to cancel and/or accelerate repayment of the facility.

What are the key points in an event of default?

  • Non-payment of principal or interest
  • Breach of financial covenants
  • Breach of all other obligations
  • Misrepresentation
  • Insolvency
  • Insolvency proceedings
  • Creditors’ process
  • Cross-default and acceleration

What is transferability? 

Transferability refers to the lender’s rights to transfer their rights and obligations under the facility agreement to a new lender (i.e. sell the loan). 

What is the difference between governing law and jurisdiction?

Governing law dictates the country under whose laws the facility documentation, including security documentation, is governed (for example, English Law). Jurisdiction dictates which country or region’s courts in which any legal disputes will be pursued (for example, the Courts of England and Wales).

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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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