The three-day intensive Loan Documentation Course will teach you the most essential skills to effectively negotiate, draft and document, syndicated loans and major loan agreements. The course focuses on corporate loan documentation drawn up under common law systems – in particular English law and New York law – which dominate the international syndicated loan market.
This is a hands-on, step by step, practical course. Emphasis is placed on understanding what provisions are essential, how to spot risks and avoid traps and thereby provide high quality loan documents.
Key Course Outcomes
By attending this course, you will, among other topics, become familiar with:
- Circumstances where the operation of law prevents the enforcement of agreements
- Cross-border enforcement issues in international transactions
- The structure and componentry of standard form syndicated loan agreements
- The interface of the commercial negotiations and the drafting of terms
- Liability for negligence of third parties (e.g. valuers, consultants, legal opinions) and the syndicate agent
- The vulnerability of guarantees
- The enforceability of letters of comfort and support
- The special circumstances of documenting loans to SPVs (Special Purpose Vehicle)
- The impact of insolvency
Course Outline – (Day One – Day Three)
The Legal System
The opening session familiarises participants in how the law actually works in the context of international financing transactions:
- Which law should be used for the documentation?
- The circumstances where the choice of law is important
- Origins of law – statute law, common law, law of equity
- The priorities in clashes of company law, contract law, insolvency law, agency law
- How the common law works – walk-through of a dispute
- Jurisdiction and enforcement issues
Pre-Requisites for Enforceability
There are 5 circumstances in which the law says that the contract has failed to come into existence. In each of these cases the courts will not assist lenders in the recovery of their money. The easiest way for lenders to lose!
- Intra vires – the company objects and the directors powers
- Intention – term sheets
- Consideration – work-arounds if absent
- Certainty and legality – severance clause
- Conditions precedent, verification certificates
- Methods of execution, powers of attorney, ostensible authority
Loan Agreement – Key Clauses
A detailed and careful analysis of the Loan Market Association (LMA) standard document for syndicated loans. This includes a critique of the clauses that are “missing” and where consideration should be given to material amendments and adjustments:
- Organisation of a syndicated loan agreement
- The LMA standard form syndicated loan agreement (English law)
- The differences of the LMA standard under South African law
- Representations and warranties – their utility
- Termination, change of ownership and prepayments
- Increased costs, broken funding periods
- Market disruption
- Benefit of the agreement, assignment, novation, sub-participations, risk participation
- Negative pledge and pari passu
- Events of default, grace periods, cross-default, material adverse change
- Set off when solvent, set off when insolvent
- Appropriation of partial payments
- Legal opinions, valuations, etc, the reliance that can be placed upon them.
- Material Adverse Change
Day One picked up the key clauses. To cover the remainder, we walk-through the LMA loan agreement to identify issues that are involved in negotiating all of the remaining clauses.
Responsibilities and Liabilities of the Agent Bank in Syndicated Lending
Where corporate loans fail, and participants in a syndicate incur loss, there is inevitable scrutiny of the Agent’s role in the initial due diligence, the information memorandum, and the administration of the facility.
This session reviews the potential liability for breach under Agency law and for negligence, how disclaimers work, and the tests for determining whether courts will uphold the disclaimer:
- The principles of agency law, and the implications for an Agent bank
- Components of the agency clause
- Disclaimer of liability
- Unfair Contract Terms Act – the tests for determining effectiveness of disclaimers
- Occurrence of default
- Managing conflicts of interest
Common law guarantees are technical documents that have a number of technical phrases and words. The legal effect of the document can be inadvertently altered if those negotiating the wording are unaware of those technical issues. A detailed explanation of each clause is therefore undertaken in this session:
- The rights of a guarantor
- The on-demand clause
- Limitations and ‘all-monies’ features
- Issues with upstream guarantees
- The commercial benefit issue
- The variations clause
- Guarantor’s right to terminate, ruling off, crystallisation of liability
- No competition clause
- Joint and several and no prejudice clauses
- Conclusive evidence clause
- The implications of the indemnity clause
- Survivorship clause
- Particular issues in litigating guarantees
Letters of Support / Comfort Letters
Some comfort letters are enforceable as contracts, others are not. The documents by their nature are vague as to their contractual status, but we go through the method of determining their enforceability:
- Reasons that a guarantee is not or cannot be provided
- Are they enforceable?
- The tests that the law applies to determine contractual status
- Review of case precedents
Security is jurisdictionally specific – i.e. the applicable circumstances and law in one country will not match precisely that of another. So this session will be brief and cover the commercial aspects and some general issues of a generic nature:
- Lex situs, applicable law
- Classification of security
- Principal types of security
- Fixed and floating charges, mortgage debentures
- Security agency, security trusts and indentures
- Pledges, liens, and constructive trusts
- Security over shares
- Assignment of policies
Where the Borrower is a Special Purpose Vehicle
In limited recourse financings and leveraged buyouts, there are particular issues that need to be addressed in the documentation. This session details those issues:
- Project Finance
- Why security is of low importance
- Bankruptcy remote vehicles
- The use of unincorporated joint ventures
- Alternative dispute resolution clausesPolicing liquidated damages clausesCashflow waterfalls
- Lockup clauses
- Direct agreements
- Leveraged Finance
- The legal structure of LBOs
- Intercreditor deeds
- Structural subordination
- Payment blockages
Where there is a clash between what the parties have agreed in the contract and the operation of Insolvency law, the latter takes priority. So lenders in particular need to understand how insolvency law can affect their rights, and override their protections:
- The general principles of insolvency
- Illustrations of differences in insolvency administration across different jurisdictions
- How contractual rights can be altered by the onset of insolvency
- Transactions at undervalue
- Other issues encountered in typical workout situations
Main Case Study
The case study at the end of the course is designed to test the application of what has been learned in a practical, problem-solving context.
Summary and Conclusion
Final questions, group discussion of key takeaways and closing remarks
Within Companies and Professional Services Firms
- Treasurers / Corporate Treasurers
- Finance Directors / Financial Controllers
- In-house legal staff / Legal Advisors
- Management Consultants
- Legal Practitioners
Within Banks and Financial Services Firms
- Banking Relationship Managers
- Portfolio Managers
- Loan Origination Managers / Loan Administration Staff
- Heads of Credit / Heads of Trade Finance
- Loan Syndications Staff / Credit Analysts
Richard has a unique blend of experience in Law, Corporate Banking, Investment Banking, Corporate Financial Management, General Management and Workout. He has gained a worldwide reputation for the quality and depth of his project finance training courses which have been developed and presented over 20 years.
- He trained as a lawyer at Cambridge and the Middle Temple and was called to the English bar.
- 5 years with an American bank, the world’s largest financier of oil & gas projects, as a corporate relationship manager in New York and London.
- 6 years: investment banking in Hong Kong and London, primarily involved in mergers and acquisitions and corporate restructurings.
- 6 years: CFO of a public group with a joint head office in the United States and Australia. In this role he was engaged in some 34 acquisitions, over 20 equity raisings and a large number of complex financings, many of them structured on a limited recourse basis.
- 18 months: responsible for the workout of a company in severe financial difficulties, being appointed as General Manager by KPMG.
- For the past 20 years Richard has acted as an independent consultant and financial trainer.
- On the consulting side he has been primarily involved in project vetting; the financial modelling and structuring of power generation, LNG, mining, and petrochemical projects.
- On the training side he conducts training courses in:
- Project finance
- Loan documentation
- Financial modelling
- Corporate finance & corporate valuation
- Mergers & acquisitions
Holiday Inn Hotel, Sandton – Johannesburg, RSA
Room layout (U-Shaped)
15th – 17th May 2019
Local Fee: R 35,000
International Fee: $ 2,999
Get 15% discount, when you register 3 or More delegates.
Get 10% discount, when you register 2 months before the course’s start date.
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