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Similar to a security trustee, appointed to act on behalf of underlying creditors.
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Issuing high yield bonds—documents list The documents listed below provide an overview of the core transaction documents typically used to document a high yield bond issuance. The description for each provides an explanation of the document's purpose and the parties which typically enter into them. Additional documents may be required to deal with aspects of a specific transaction (such as escrow arrangements) or to reflect bespoke arrangements. Document Description 144A Global Note A single note signed by the issuer which represents the entire amount of debt in relation to the Rule 144A issuance.Section 5 of the US Securities Act 1933 requires all offers and sales of securities in the US to be registered with the Securities and Exchange Commission (SEC) unless an exemption applies. Rule 144A is a safe harbour exemption from the section 5 requirement and it enables the initial purchasers of the bonds (see Purchase Agreement below) to resell the bonds to 'qualified institutional buyers', institutional investors who meet certain criteria.For more information on Rule 144A,...
Intercreditor negotiation checklist—junior lenders The table below provides an overview of key points that a junior lender should check for when reviewing a straightforward intercreditor agreement involving senior secured lenders, junior secured lenders and unsecured subordinated creditors. It is aimed at users with limited experience of intercreditor agreements. The table focuses on the most important and common issues on a straightforward secured bilateral corporate loan transaction and does not aim to cover every possible negotiating point, nor does it cover points on specialist or more complicated transactions such as those in the leverage finance market. What is acceptable will be influenced by the type of transaction, the particular lender involved, as well as the relative negotiating strength of the parties. For information on intercreditor issues in specialist transactions, see Links to useful intercreditor materials below. Links to useful intercreditor materials Introductory materials For an introductory note on intercreditor agreements, including information on common provisions in intercreditor agreements, see Practice Note: Introductory guide to Intercreditor Agreements. Practice Note: How to draft...
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Tacking further advances to existing security Creating effective security is the first step in improving a creditor's position. Once that is done, it is then necessary to ensure that the security will take priority over competing security interests in the same asset. The rules governing priority of security interests are generally discussed in Practice Note: Priority between security interests. There are additional potential pitfalls relating to priority which a secured creditor needs to be aware of if it intends to make further advances (ie further loans) to the borrower under a loan agreement. In commercial transactions, further advances are very common in the context of term loan facilities which permit multiple drawdowns and revolving credit facilities (see Practice Note: Overdrafts, term loans and revolving credit facilities). This Practice Note looks at what is meant by 'tacking', before looking in detail at the relevant rules and the impact on priority. It also looks at practical steps that can be taken to protect the priority position of a...
Bilateral, syndicated and club arrangements One of the key features used to categorise loans is the number of lenders involved. A loan involving one lender is known as a 'bilateral loan'. A loan involving more than one lender may be a 'syndicated loan' or be referred to as a 'club loan'. Multiple lenders can also be indirectly involved in the same loan by way of sub-participation. This Practice Note explains the key features of bilateral loans, syndicated loans and club loans. Bilateral loans A bilateral loan is a loan involving a single lender. There may be a single borrower or multiple obligors involved, ie the borrower and other companies in the borrower's group as guarantors and/or security providers. Bilateral loans are normally used for loans of relatively small amounts and where less complex financing arrangements are required (eg a simple overdraft or term loan). Where the borrower requires a larger loan, a single lender may be unwilling or unable to advance the full amount required by...
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Arrangement fee letter: for use with a syndicated facility agreement in an acquisition finance transaction [To be printed on the headed paper of the arranger[S]] [insert date] To: [insert full name and address of [parent]] Dear [insert full name of parent] We refer to the facilities agreement dated [insert date of facility agreement] between [insert full name of the parent] as the Parent, the subsidiaries of the Parent listed in [insert Schedule containing borrowers‘ details] as Original Borrowers, the subsidiaries of the Parent listed in [insert Schedule containing guarantors‘ details] as Original Guarantors, the financial institutions listed in [insert Schedule containing lenders’ details] as Original Lenders, [insert full name of arranger[s]] as the Arranger, [insert full name of facility agent] as the Agent, [insert full name of security agent] as Security Agent, [insert reference to any other parties] as amended, novated, supplemented, restated or replaced from time to time in accordance with its terms (the Facilities Agreement). 1 This is the Fee Letter setting out the arrangement fee payable by...
Agency fee letter: for use with a syndicated facility agreement in an acquisition finance transaction [To be printed on the headed paper of the agent/security agent] [insert date] To: [insert full name and address of [parent]] Dear [insert full name of parent] 1 We refer to the facilities agreement dated [insert date of facility agreement] between [insert full name of the parent] as the Parent, the subsidiaries of the Parent listed in [insert Schedule containing borrowers' details] as Original Borrowers, the subsidiaries of the Parent listed in [insert Schedule containing guarantors' details] as Original Guarantors, the financial institutions listed in [insert Schedule containing lenders details] as Original Lenders, [insert full name of arranger[s]] as the Arranger, [insert full name of facility agent] as the Agent, [insert full name of security agent[s]] as Security Agent, [insert reference to any other parties] amended, novated, supplemented, restated or replaced from time to time in accordance with its terms (the Facilities Agreement). 2 This is the Fee Letter setting out the agency fee...
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Where a (security) trust is intended to benefit future beneficiaries but initially only benefits one party who is both trustee and sole beneficiary is it arguable that the legal and beneficial interests do not merge? If they do merge, can the interests be demerged if there are new beneficiaries in the future (ie when the sole lender sells down the loan) by a contemporaneous declaration by the trustee that it holds the property on the terms of the trust? We refer you to the following Practice Note which you may find useful for your purposes: The security agent. It is quite common for initially bilateral loans to be set up with agreements containing trust and agency provisions similar to those used in the syndicated loans market so that a later sale of participations in the loan by the original lender can take place if this is felt desirable. The analysis of the first question depends upon the express terms of the document creating the trust and in...
What are the Companies House registration requirements where an existing charge is transferred to a new chargee? This Q&A discusses whether a charge needs to be re-registered at Companies House if it is transferred from one chargee to another. When might a charge be transferred to a new lender? Common situations where a security interest may be transferred from one chargee to another include: • where a secured bilateral loan is transferred from one lender to another and the corresponding security is likewise transferred, or • a security agent or trustee in a syndicated loan resigns and a new one is appointed in its place The situations above should be distinguished from circumstances where a syndicated loan is sold down or transferred by syndicate lenders through loan transfers, assignments or sub-participations. In this situation, security is typically not transferred; instead, transaction security is granted to a security agent or trustee which holds the security on trust for and on behalf of the lenders from time to time....
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Construction analysis: There is a ‘a dearth of case law’on section 1(1) of the Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999), as observed by Lenon KC, the judge in the case of HNW Lending Ltd v Lawrence. While an accurate assessment, the judge would have been well within his rights to add (but didn’t) that the dearth of caselaw extends to the entire Act, not just C(RTP)A 1999, s 1(1). This is surprising given the rising prevalence of reliance on C(RTP)A 1999 in commercial contracts (and perhaps most frequently, construction contracts) since its introduction in 1999. Written by Kevin Henderson, associate at BCLP.
This week’s edition of Banking and Finance weekly highlights includes: (1) European Commission releases updated slides explaining the Withdrawal Agreement, (2) ISDA reviews 2019 interest rate benchmarks and (3) House of Lords EU committee raises points on proposed Regulation on the establishment of a framework to facilitate sustainable investment post-Brexit.
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