LPC 2020 DEBT FINANCE
Night Before Notes
Table of Contents CASES
Assignment – order of priority
SGS 1 – Overview of a Banking Transaction 1 - Dearle v Hall: assignments - date of notice of the assignment
SGS 2 – Representations, Undertakings, Margin Protection 7 given to the debtor.
SGS 3 – Events of Default 17 Floating charges
SGS 4 – Due Diligence, CPs, Transaction Structure 26 - Spectrum substance > label
SGS 5 – Loan Transfers 30 - Yorkshire level of control over asset
SGS 6 – Introduction to Bonds 37 Common law problems for Lender
SGS 7 – Listing a Bond 41 - Claytons Case in the absence of an agreement to the contrary
SGS 8 – Security: Assets and Priorities 48 between the creditor and debtor, repayments by the debtor
will be used to repay loans in the order in which they arose -
SGS 9 – Security: Risks 56
i.e. the oldest debt will be paid off first.
SGS 10 – Security: Guarantees, Indemnities 61 - Hopkinson v Rolt where a borrower has granted security over
its assets to two different lenders first priority of lender X in
LAW respect of any new advances made under its loan will be lost
LPDT Rules (Extract) – PR Butterworths to Y once lender X has notice of lender Y’s security.
SGS 7 Issuing listed bond SGS 8-10 Security Guarantee
- PR 2.1.3, 2.2.1, 2.2.2, 2.5.3 FSMA - Triodos the guarantor of a contract is discharged by any
and 5.5.4. - ss84, 85, 87A, 87B – prospectus significant variation to that contract.
- PR 3.1.-1 (PD Reg Art 2(1), requirements
2(2) (a), (b) and 4(1)) - s90, Schedule 10 para 1 and 3 –
- PR 3.1.1A liability for bond prospectus
- PR 3.1.7A CA06
- PR 2.3.1 - s859A(docs), H(void), I(CH steps),
L(release), Q(inspection)
- PR App 3.1.1 Annexes 4, 5, 6,
IA86
9 and 13
- Para 14, Schedule B1
SGS 1 – Overview of a Banking Transaction
Types of facility
Overdraft Term loan Rolling Capital Facility
Working capital facility Specific sum for medium to long period Specific sum for medium to long period
Tool to assist cash flow Borrowed amount may be fully drawn Borrowed amount may be fully drawn
Standard terms and conditions down in lump sum or several tranches down in lump sum or several tranches ->
Characteristics
Up to specified limit Repayable at the end of term can roll over the borrowing for another
Legally repayable on demand (ie bank Any prepayments usually final Interest Period for the entire length of
doesn’t need reason and no need to be a Repayments can be structured in several facility ie until RCF matures
breach to require the repayment) ways: amortisation, balloon repayment, Documentation similar to term loan
Little formal documentation bullet repayment
Interest payable on daily overdrawn More documentation
balance
‘uncommitted’ ‘committed’ committed
Assist cash flow ie keep business liquid Need specific sum for a medium-long Working capital
‘working capital facility’ period i.e. for the purchase of property,
Use
Short term funding only; not core source of acquisition, starting-up costs.
funding
Bilateral v syndicated loans Syndicated Loan – documents
Bilateral – contract between two parties 1. Term sheet
Syndicated loan – loan made by two or more lenders on the same a. Principal terms of loan agreement
terms and governed by a single loan agreement b. Non-binding except for confidentiality and costs
2. Mandate / Commitment letter (only syndicated loans)
Syndicated Loan – due diligence a. Terms on which the borrower appoints the arranger
Initial investigation – credit analysis and the basis of which the arranger has agreed
Credit approval by Credit Committee b. Term sheet attached
Legal due diligence e.g. authority to borrow c. Legally binding provisions here
3. Loan agreement – LMA
Syndicated Loan – process a. Operating clauses: use and repayment
Initial approach due diligence on borrower credit committee approval b. Clauses governing the relationship between parties
agree term sheet documentation (facility agreement, information and enforcement (boilerplate)
memorandum, fee letters) signing and completion if CPs met drawdown
1
Night Before Notes
Table of Contents CASES
Assignment – order of priority
SGS 1 – Overview of a Banking Transaction 1 - Dearle v Hall: assignments - date of notice of the assignment
SGS 2 – Representations, Undertakings, Margin Protection 7 given to the debtor.
SGS 3 – Events of Default 17 Floating charges
SGS 4 – Due Diligence, CPs, Transaction Structure 26 - Spectrum substance > label
SGS 5 – Loan Transfers 30 - Yorkshire level of control over asset
SGS 6 – Introduction to Bonds 37 Common law problems for Lender
SGS 7 – Listing a Bond 41 - Claytons Case in the absence of an agreement to the contrary
SGS 8 – Security: Assets and Priorities 48 between the creditor and debtor, repayments by the debtor
will be used to repay loans in the order in which they arose -
SGS 9 – Security: Risks 56
i.e. the oldest debt will be paid off first.
SGS 10 – Security: Guarantees, Indemnities 61 - Hopkinson v Rolt where a borrower has granted security over
its assets to two different lenders first priority of lender X in
LAW respect of any new advances made under its loan will be lost
LPDT Rules (Extract) – PR Butterworths to Y once lender X has notice of lender Y’s security.
SGS 7 Issuing listed bond SGS 8-10 Security Guarantee
- PR 2.1.3, 2.2.1, 2.2.2, 2.5.3 FSMA - Triodos the guarantor of a contract is discharged by any
and 5.5.4. - ss84, 85, 87A, 87B – prospectus significant variation to that contract.
- PR 3.1.-1 (PD Reg Art 2(1), requirements
2(2) (a), (b) and 4(1)) - s90, Schedule 10 para 1 and 3 –
- PR 3.1.1A liability for bond prospectus
- PR 3.1.7A CA06
- PR 2.3.1 - s859A(docs), H(void), I(CH steps),
L(release), Q(inspection)
- PR App 3.1.1 Annexes 4, 5, 6,
IA86
9 and 13
- Para 14, Schedule B1
SGS 1 – Overview of a Banking Transaction
Types of facility
Overdraft Term loan Rolling Capital Facility
Working capital facility Specific sum for medium to long period Specific sum for medium to long period
Tool to assist cash flow Borrowed amount may be fully drawn Borrowed amount may be fully drawn
Standard terms and conditions down in lump sum or several tranches down in lump sum or several tranches ->
Characteristics
Up to specified limit Repayable at the end of term can roll over the borrowing for another
Legally repayable on demand (ie bank Any prepayments usually final Interest Period for the entire length of
doesn’t need reason and no need to be a Repayments can be structured in several facility ie until RCF matures
breach to require the repayment) ways: amortisation, balloon repayment, Documentation similar to term loan
Little formal documentation bullet repayment
Interest payable on daily overdrawn More documentation
balance
‘uncommitted’ ‘committed’ committed
Assist cash flow ie keep business liquid Need specific sum for a medium-long Working capital
‘working capital facility’ period i.e. for the purchase of property,
Use
Short term funding only; not core source of acquisition, starting-up costs.
funding
Bilateral v syndicated loans Syndicated Loan – documents
Bilateral – contract between two parties 1. Term sheet
Syndicated loan – loan made by two or more lenders on the same a. Principal terms of loan agreement
terms and governed by a single loan agreement b. Non-binding except for confidentiality and costs
2. Mandate / Commitment letter (only syndicated loans)
Syndicated Loan – due diligence a. Terms on which the borrower appoints the arranger
Initial investigation – credit analysis and the basis of which the arranger has agreed
Credit approval by Credit Committee b. Term sheet attached
Legal due diligence e.g. authority to borrow c. Legally binding provisions here
3. Loan agreement – LMA
Syndicated Loan – process a. Operating clauses: use and repayment
Initial approach due diligence on borrower credit committee approval b. Clauses governing the relationship between parties
agree term sheet documentation (facility agreement, information and enforcement (boilerplate)
memorandum, fee letters) signing and completion if CPs met drawdown
1
