Facilities Agreement Lenders

Representations and guarantees are similar in all facility agreements. They focus on the borrower`s legal capacity to enter into financing agreements and the nature of the borrower`s activity. They will often be broad and the borrower may try to limit them to issues that, if not correct, would have a significant negative effect. This qualification may apply to a large number of insurance and guarantees relating to the borrower`s activities (for example. B litigation, environmental and accounting matters), but will probably not be acceptable to the lender in order to limit the borrower`s ability to enter into financing agreements or with respect to important financial information. These include provisions relating to the facilities, their purpose and their availability. It will also contain details of repayment plans and interest payable. A facility is a formal financial support program offered by a credit institution to help a business that needs working capital. Facilities include overdraft services, deferred payment plans, lines of credit (LOC), revolving loans, long-term loans, letters of credit and line of credit loans. A facility is essentially another name for a loan taken out by a company. Mandatory costs: This formula, which deals with the costs incurred by banks to meet their regulatory obligations, is rarely negotiated.

It is made available as a timetable for the agreement of the institutions. However, the interest rate should only apply to libor facilities and not to basic interest facilities, since a bank`s basic interest rate already contains an amount corresponding to the mandatory costs. Default events: These will be voluminous. However, there are good reasons for them and, if negotiated properly, they should not allow the loan to be used unless there is a serious breach of the facility agreement. There are many definitions in each facility agreement, but most are either standard – and generally uncontested – or specifically for individual transactions. They should be carefully considered and, if necessary, carefully considered using the lender`s offer letter/offer sheet. LIBOR: The London Interbank Offered Rate (LIBOR) is a daily benchmark rate based on rates at which banks can borrow unsecured funds from other banks. It is generally defined for the purposes of a facility agreement by reference to a screen interest rate (usually the British Bankers Association interest rate for the currency and the period in question) or at the base rate of the reference bank, which represents the average interest rate at which the Bank can borrow funds on the London interbank market. Availability: The borrower should check whether the facilities are available when the borrower needs them (for example. B to finance an acquisition).