#3281 - Amending A Credit Agreement Crib Sheet - Finance and Capital Markets

Amending a Credit Agreement

1. Credit Agreement from Bank’s perspective

   1. Parties

      1. Amended to reflect the Syndicated Facilities and the term sheet

         1. Is the borrower also a guarantor?

         2. Is there a missing party such as a guaranteeing subsidiary?

            1. Cross-guaranteeing obligations by parents & subsidiaries

   2. Definitions & Interpretation

      1. Obligor

         1. Mean each borrower or each guarantor

            1. Protects the banks’ position under the new Credit Agreement

      2. Commitment

         1. Are there 2 facilities?

            1. Term Loan

            2. Revolving Credit Facility

      3. Total Commitments

         1. Total Facility A commitments

         2. Total Facility B Commitments

         3. Are amounts correct?

      4. Facility

         1. Facility A refer to clause 2.1 (Term loan)

         2. Facility B refer to clause 2.2 (RCF)

      5. Material Adverse Effect

         1. Refer to Obligor rather than Borrower to reflect the fact that there is now more than one borrower and each company is both borrower and guarantor

            1. This also makes it clear that the banks are monitoring the ability of each company to comply with its obligations not only as a borrower but also as a security provider and guarantor

               1. This will strength the representations and undertakings which are triggered by determining if there is a Material Adverse Effect

            2. The banks would certainly not want this to be judged only by reference to the borrower of the term facility only (STATE PARTY)

               1. If the venture is speculative and other banks may be reluctant to join the Syndicate in the current economic client, the Arranger will be keen to demonstrate that the Credit Agreement contains robust protections for the syndicate

      6. Availability period

         1. Does it correspond to term sheet in regards to the Term loan and the RCF

      7. Final Maturity Date

         1. Does it correspond to term sheet

      8. Margin

         1. Does it correspond to term sheet in relation to the term facility?

         2. Does definition need expanding to include the different interest rate for the RCF?

      9. Is this a secured transaction?

         1. Insert definitions of Security Trustee and Security Document

            1. Incorporate these definitions into the definitions of Finance Parties and Finance Documents respectively

      10. Mandatory Costs

          1. Does this make up the interest rate?

          2. Is it defined in the agreement?

   3. Facility

      1. Reflect the fact that there are two facilities

         1. RCF available to WHICH COMPANIES (Clause 2.2)

         2. Term loan available to WHOM (Clause 2.1)

   4. Purpose

      1. Does this reflect the term sheet?

   5. Conditions Precedent

      1. Do these reflect the facts?

         1. Refer to a schedule?

      2. No drawdowns unless these are fulfilled

   6. Utilisation

      1. Does this correspond to term sheet?

      2. Minimum amounts to be request

      3. Complied with CPs

   7. Repayment

      1. Does this correspond with term sheet?

         1. Term loan

         2. RCF

   8. Prepayment and Cancellation

      1. One business day notice from the borrower to prepay is not sufficient notice to give the Facility Agent

      2. Size of repayments should be valued in accordance with the size of the overall facility.

         1. Small amounts such as 10,000 might be overly burdensome for the Facility Agent

            1. More appropriate minimum repayment is 100,000 to reduce the administration required by the Facility Agent

      3. Reflect term sheet

         1. Will prepayment reduce remaining instalments in inverse order of maturity or rateably?

            1. Inverse order of maturity will reduce the length of the facility and therefore the length of time that the banks will be exposed to the risk that the borrower cannot repay the facility

      4. Borrower should be required to pay break costs if it prepays on any date other than the first day of an Interest Period to cover the syndicate’s costs on their own borrowing on the interbank markets

         1. Banks will match the interest periods and repayment dates on any interbank borrowing required for them to fund the term facility under the credit agreement

            1. Banks cannot prepay interbank loans, so they would still have to pay the interest if the borrower prepays at a different time, even though they may not have received sufficient interest from the borrower to cover the full amount

      5. Banks may also consider charging a prepayment fee given that the borrower may find it harder to borrower elsewhere now that the economic climate is harsher than it was previously

   9. Interest

      1. Margin correct figure for facilities?

      2. Conform to term sheet

   10. Grace Period

       1. Reflect term sheet

   11. Events of default

       1. Cover the correct circumstances

          1. Cross default

             1. Bank will want a cross acceleration clause such that it will want to be able to declare sums payable should they be capable of being declared payable or being placed on demand under another agreement.

   12. Representations

       1. Representations in the credit agreement are an important way

          1. Getting the borrowing group to disclose any issues which could present a risk to the banks before the facilities are utilised

          2. Of ensuring that its position does not deteriorate over the life of the facilities

       2. Arranger should insist that every obligor make the representations not simply the borrower under the term facility

       3. Use of specific representations

       4. Repetition of some representations on the date of each utilisation request, each utilisation and on each interest payment date

          1. This is so the banks can continue to monitor the position of the borrowing group throughout the life of the facilities

   13. Compliance with laws

       1. Apply to both obligors and not just the borrower

       2. Bank will want clause to state that the undertaking would be breached if the facility agent considers that the failure to comply with any law is reasonably likely to have a Material Adverse Effect

          1. If it simply states that breached only if failure to comply would have a Material Adverse Effect, this means that the undertaking can only be triggered after waiting to see if the consequences actually have a Material Adverse Effect, by which time the banks’ chances of being repaid may have diminished considerably

   14. Off-loading risk

       1. Banks will want to be able to assign or transfer their risk under the credit agreement

          1. They will want either an absolute or a qualified prohibition on an obligor assigning or transferring its rights and obligations

   15. Increased Costs

       1. Bank will want this included to be able to pass an increase in costs on to the borrower

   16. Signatures

       1. Each party needs to sign separately for each capacity it holds

2. Credit Agreement from Borrower’s perspective

   1. Parties

      1. Amended to reflect the Syndicated Facilities and the term sheet

         1. Is the borrower also a guarantor?

         2. Is there a missing party such as a guaranteeing subsidiary?

            1. Cross-guaranteeing obligations by parents & subsidiaries

   2. Definitions & Interpretation

      1. Obligor

         1. Mean each borrower or each guarantor

      2. Commitment

         1. Are there 2 facilities?

            1. Term Loan

            2. Revolving Credit Facility

      3. Total Commitments

         1. Total Facility A commitments

         2. Total Facility B Commitments

         3. Are amounts correct?

      4. Facility

         1. Facility A refer to clause 2.1 (Term loan)

         2. Facility B refer to clause 2.2 (RCF)

      5. Material Adverse Effect

         1. Refer Borrower rather than Obligor

            1. Borrower will prefer bank to only monitor the ability of the company in its capacity as borrower and not security provider and guarantor

               1. This will weaken the representations and undertakings which are triggered by determining if there is a Material Adverse Effect

      6. Availability period

         1. Does it correspond to term sheet in regards to the Term loan and the RCF

      7. Final Maturity Date

         1. Does it correspond to term sheet

      8. Margin

         1. Does it correspond to term sheet in relation to the term facility?

         2. Does definition need expanding to include the different interest rate for the RCF?

      9. Is this a secured transaction?

         1. Insert definitions of Security Trustee and Security Document

            1. Incorporate these definitions into the definitions of Finance Parties and Finance Documents respectively

      10. Mandatory Costs

          1. Does this make up the interest rate?

          2. Is it defined in the agreement?

   3. Facility

      1. Reflect the fact that there are two facilities

         1. RCF available to WHICH COMPANIES (Clause 2.2)

         2. Term loan available to WHOM (Clause 2.1)

   4. Purpose

      1. Does this reflect the term sheet?

      2. Borrower will prefer this to be as wide as possible

   5. Conditions Precedent

      1. Do these reflect the facts?

         1. Refer to a schedule?

      2. No drawdowns unless these are fulfilled

         1. What about those conditions that can only be satisfied post-completion?

         2. Ability for conditions to be waived

   6. Utilisation

      1. Does this correspond to term sheet?

      2. Minimum amounts to be request

         1. Borrower will want minimums to be as loss as possible

      3. Complied with CPs

   7. Repayment

      1. Does this correspond with term sheet?

         1. Term loan

         2. RCF

   8. Prepayment and Cancellation

      1. Borrower will prefer as short a notice period as possible for prepayment

         1. One business day (bank highly unlikely to accept this)

      2. Borrower will want to able to prepay any sums it wishes, not subject to a minimum denomination

      3. Reflect term sheet

         1. Will prepayment reduce remaining instalments in inverse order of maturity or rateably?

            1. Inverse order of maturity will reduce the length of the facility and therefore the length of time that the banks will be exposed to the risk that the borrower cannot repay the facility

            2. Borrower is likely to prefer the sums to be applied rateably thus reducing its day-to-day commitments. The term of the loan will remain the sum but the sums payable at each repayment date will be lowered

      4. Borrower should not have to pay break costs if it prepays on any date other than the first day of an Interest Period

         1. Banks will match the interest periods and repayment dates on any interbank borrowing required for them to fund the term facility under the credit...