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Negotiating A Facility Agreement For A Corporate Borrower Checklist

Businesses or financial alliances govern the borrower`s financial situation and health. They define certain parameters in which the borrower must operate. The borrower`s auditors should be asked to view their contents as soon as possible. The dates on which these companies are subject to review should be subject to scrutiny, as should the separate financial definitions applicable. Financial commitments are a key element of any facility agreement and are probably the most likely to cause a default event if they are breached. Stronger borrowers can negotiate a right to resolve violations of financial pacts, for example by investing more money in the business. This is called the equity cure. Look closely at the default rules crossed. It is quite possible that the loan facility being negotiated is not the first or only loan the borrower has made to that loan. While the borrower can consider both loans on a standalone basis, the lender often sees things differently.

The “cross-by-default” rules should be fought as much as possible, but they can be difficult to push back. For some transactions, it may be necessary to obtain a guarantee from the lender that it is a qualifying bank (z.B if the borrower is dealing with a foreign bank). The biggest is a check. The accountant performs some diligence on the financial information provided by the company, conducts a limited investigation of the company, and then applies sufficient procedures to provide an appropriate basis for limited assurance that no significant changes are required for the returns to be consistent with GAAP. This may be acceptable to some lenders, especially when the borrower is a small start-up. This section contains the insurance and guarantees, commitments and delays that apply to each facility. It will also contain provisions that protect the bank from any change in circumstances that may affect its lending activities. On the other hand, “reasonable” is something worth fighting for, such as obtaining the lender`s consent, that consent must never be “unduly withheld, conditioned or delayed.” A lender is subject to tacit or legal obligations of good faith and fairness, but there is no overall obligation to act in a “reasonable” manner in all contracts or to make a particular decision. However, this concession can be difficult, especially in tight credit markets.

It is never available in a section dealing with credit defaults. For more information on the Cannais provisions of facilitated contracts, visit the Loan Markets Association or the Association of Corporate Treasure.