The LSTA’s Complete Credit Agreement Guide 2nd Edition by Michael Bellucci, Jerome McCluskey – Ebook PDF Instant Download/Delivery: 1259644871, 9781259644870
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ISBN 10: 1259644871
ISBN 13: 9781259644870
Author: Michael Bellucci, Jerome McCluskey
The definitive guide for navigating today’s credit agreements Today’s syndicated loan market and underlying credit agreements are far more complex than ever. Since the global financial crisis, the art of corporate loan syndications, loan trading, and investing in this asset class have changed dramatically. Lenders are more diverse, borrowers more demanding, and regulations more stringent. Consequently, the credit agreement has evolved, incorporating many new provisions and a host of revisions to existing ones. The LSTA’s Complete Credit Agreement Guide brings you up to speed on today’s credit agreements and helps you navigate these complex instruments. This comprehensive guide has been fully updated to address seven years of major change—which has all but transformed the loan market as we knew it. It provides everything you need to address these new developments, including what to look for in large sponsor-driven deals, the rise of “covenant lite” agreements for corporate borrowers seeking fewer covenant restrictions, Yankee Loans, other products resulting from globalization, and other product developments driven by the diversification of the investor class. You’ll benefit from the authors’ in-depth coverage of all the nuances of today’s credit agreements, as well as their tips on how to protect your loan, manage defaults, and navigate cross-border deals. This reliable guide covers: o Commitments, Loans, and Letters of Credit o Interest and Fees o Amortization and Maturity o Conditions Precedent o Representations o Covenants o Guarantees and Security o Defaults and Enforcement o Interlender, Voting, and Agency issues o Defaulting Lenders o Assignments, Participations, and Disqualified Lender ListsBorrower Rights o Regulatory Developments Structuring and managing credit agreements has always been a difficult process – but now it’s more complicated than ever. Whether you work for a company that borrows money in the syndicated loan market or for a bank, a hedge fund, pension fund, insurance company, or other financial institution, the LSTA’s Complete Credit Agreement Guide puts you ahead of the curve of today’s credit landscape.
The LSTA’s Complete Credit Agreement Guide 2nd Table of contents:
1 The Credit Agreement
2 Commitments, Loans, and Letters of Credit
2.1 Credit Variants
2.1.1 Loans
2.1.1.1 Revolving Credit versus Term Loans
2.1.1.2 A and B Loan Tranches
2.1.1.3 Competitive Bid Loans
2.1.1.4 Swingline Loans
2.1.2 Letters of Credit
2.1.2.1 Application for Issuance
2.1.2.2 Form of Letter of Credit
2.1.2.3 Expiration Date
2.1.2.4 Limitations on Amount
2.1.2.5 Examination of Documents
2.1.2.6 Borrower’s Reimbursement Obligation
2.1.2.7 Participations by Lenders
2.1.2.8 Strict versus Substantial Compliance
2.1.2.9 Indemnification
2.1.2.10 Cash Collateral
2.1.3 Synthetic Letters of Credit
2.1.4 Bankers’ Acceptances
2.2 Commitments
2.2.1 Several Liability
2.2.2 Reducing Revolving Credit Commitments
2.2.3 Terminating Commitments
2.2.4 Increasing Commitments: Accordion Features and Incremental Facilities
2.2.4.1 Accordion Feature
2.2.4.2 Incremental Facilities
2.2.4.3 Recent Developments
2.2.5 “Termout” of Revolving Credit Commitments
2.2.6 Loan Commitment Letters
2.3 Multicurrency Facilities
2.3.1 Ratable Committed Dollar/FX Loans
2.3.2 Nonratable Committed Loans
2.3.3 Local Currency Tranches
2.3.4 Uncommitted FX Loans
2.3.5 Multicurrency Competitive Bid Loans
2.4 Second Lien and Unitranche Facilities
2.4.1 General Observations
2.4.2 Bankruptcy Issues
2.4.2.1 Post-Petition Interest
2.4.2.2 Debtor-in-Possession Financing and Use of Cash Collateral
2.4.2.3 Automatic Stay
2.4.2.4 Contest Rights
2.4.2.5 Plan Confirmation
2.4.2.6 Aggregate Effect
2.4.2.7 Recent Bankruptcy Decisions
2.4.3 Unitranche Facilities
2.5 Minimums, Multiples, and Frequency
2.6 Notices and Mechanics of Funding
2.7 Amend and Extend
2.8 Refinancing Facilities
2.9 Cashless Settlement
3 Interest and fees
3.1 Interest
3.1.1 Base Rate Interest
3.1.2 LIBOR Interest
3.1.2.1 General Principles
3.1.2.2 Interest Periods
3.1.2.3 Reserve Requirements
3.1.2.4 Why LIBOR?
3.1.2.5 LIBOR Scandal and Recent Developments
3.1.3 Competitive Bid Loans
3.1.4 Other Pricing Options
3.1.5 Applicable Margins
3.1.5.1 General Principles
3.1.5.2 Margins Based upon Credit Ratings
3.1.5.3 Margins Based upon Financial Tests
3.1.6 Interest Payment Dates
3.1.7 PIK Interest and “Toggle” Loans
3.1.8 Default Interest
3.2 Fees
3.2.1 Commitment Fees
3.2.2 Facility Fees
3.2.3 Utilization Fees
3.2.4 Letter of Credit Fees
3.2.5 Swingline Fronting Fees
3.2.6 Upfront Fees
3.2.7 Administrative Agency Fees
3.3 Computation of Interest and Fees
3.4 Accrual Conventions
3.5 Business Day Conventions
3.6 Lending Offices
3.7 Yield Protection
3.7.1 Increased Costs
3.7.2 Capital Costs
3.7.3 LIBOR Market Disruption
3.7.3.1 Background
3.7.3.2 Components of the Market Disruption Clause
3.7.3.3 Historical Issues with the Market Disruption Clause
3.7.4 Illegality
3.7.5 Breakfunding
3.7.5.1 General Principles
3.7.5.2 Breakfunding upon Initial Drawdowns
3.7.5.3 Sell-Down Costs
3.7.5.4 Compared to Prepayment Premiums
3.7.6 Taxes
3.7.6.1 Evidence of Payments
3.7.6.2 Actions by Lenders to Minimize Taxes
3.7.6.3 Refunds and Credits
3.7.6.4 Exclusions
3.8 Interest Savings Clauses
4 Amortization and Maturity
4.1 Payments Generally
4.1.1 Immediately Available Funds
4.1.2 Time of Payment
4.1.3 Extensions for Nonbusiness Days
4.1.4 Obligation to Repay Absolute
4.2 Scheduled Repayment
4.3 Advancing the Maturity Date
4.4 364-Day Facilities
4.5 Stripped Loan Facilities
4.6 Voluntary Prepayments
4.7 Mandatory Prepayments
4.7.1 Revolving Clean Downs
4.7.2 Borrowing Base
4.7.3 Asset Sales
4.7.4 Casualty Events
4.7.5 Debt and Equity Issuances
4.7.6 Excess Cash Flow/Cash Sweep
4.7.7 Change of Control
4.7.8 Currency Adjustments in Multicurrency Deals
4.8 Allocation of Prepayments
4.9 Cover for Letters of Credit
4.10 Prepayment Opt Outs
4.11 Prepayment Premiums
4.12 Multiple Borrowers
5 Conditions Precedent
5.1 Effectiveness Conditions
5.1.1 Signing versus Closing
5.1.2 Execution; Lender Addenda; Fronting Letters
5.1.3 Matters Relating to Organization and Authorization
5.1.4 Opinions
5.1.5 Government Approvals
5.1.6 The MAC Condition
5.1.7 Conditions That Relate to Perfection of Collateral
5.1.8 Promissory Notes
5.1.9 Special Conditions Applicable to Non-U.S. Borrowers
5.1.10 Repayment of Other Debt
5.1.11 Other Conditions
5.1.11.1 Appraisals
5.1.11.2 Solvency
5.1.11.3 Environmental Due Diligence
5.1.11.4 Insurance
5.1.11.5 Patriot Act
5.1.11.6 The Catchall
5.1.12 Effectiveness
5.2 Ongoing Conditions
5.2.1 Representations
5.2.2 Defaults
5.3 SunGard Conditionality in Acquisition Financings
6 Representations
6.1 Legal Matters Representations
6.1.1 Organization, Existence, Power, and Qualification to Do Business
6.1.2 Due Authorization
6.1.3 Due Execution
6.1.4 Enforceability
6.1.5 No Conflict
6.1.6 Government Approvals
6.1.7 Compliance with Law; Licenses
6.1.8 Investment Company Act
6.1.9 Anti-Corruption Regulations
6.1.10 Office of Foreign Assets Control Regulations
6.1.11 USA PATRIOT Act
6.1.12 Margin Regulations
6.2 Financial Condition Representations
6.2.1 Financial Statements
6.2.2 Material Adverse Change
6.2.3 Litigation
6.2.4 Projections
6.2.5 Taxes
6.2.6 Pension and Welfare Plans
6.2.7 Solvency
6.2.8 Material Agreements
6.3 Representations and Disclosures Regarding the Business
6.3.1 Capitalization
6.3.2 Subsidiaries and Investments
6.3.3 Real Property
6.3.4 Existing Debt and Liens
6.3.5 Title to Property
6.3.6 Labor Matters
6.3.7 Intellectual Property
6.3.8 Environmental Matters
6.3.9 No Burdensome Restrictions
6.4 Representations by Foreign Borrowers
6.4.1 Commercial Activity
6.4.2 Pari Passu Ranking
6.4.3 Legal Form
6.4.4 Foreign Taxes
6.4.5 Sovereign Borrowers
6.5 Other Representations
6.5.1 Completeness of Disclosures
6.5.2 Status as Senior Debt
6.5.3 Perfection and Priority of Security
6.6 The Special Circumstances of Acquisition Financings
7 Covenants
7.1 Some General Principles
7.2 Scope of Covenant Coverage
7.2.1 Subsidiaries Generally
7.2.2 Restricted and Unrestricted Subsidiaries
7.2.3 Significant Subsidiaries and Immaterial Subsidiaries
7.3 Covenant Definitions
7.3.1 Definitions Generally; GAAP and IFRS
7.3.2 Key Financial Definitions
7.3.2.1 Debt
7.3.2.2 EBITDA
7.4 Financial Covenants
7.4.1 Date-Specific versus Performance versus Hybrid Covenants; Annualized and Rolling Periods
7.4.2 Phase-In and Pro Forma Treatment
7.4.3 Date-Specific Financial Covenants
7.4.3.1 Net Worth
7.4.3.2 Net Worth Ratio
7.4.3.3 Current Ratio/Working Capital
7.4.4 Performance-Based Financial Covenants
7.4.4.1 Interest Coverage Ratio
7.4.4.2 Debt Service Coverage Ratio
7.4.4.3 Fixed Charges Coverage Ratio
7.4.4.4 Lease Payments
7.4.4.5 Capital Expenditures
7.4.5 Hybrid Financial Covenants
7.4.5.1 Leverage Ratio
7.5 Affirmative Covenants
7.5.1 Disclosure Covenants
7.5.1.1 Financial Statements
7.5.1.2 Compliance Certificates
7.5.1.3 Notices of Material Events
7.5.1.4 Catchall Provisions
7.5.1.5 Delivery
7.5.2 Inspection Rights
7.5.3 Insurance
7.5.4 Miscellaneous “Who-Can-Object” Covenants
7.5.4.1 Books and Records
7.5.4.2 Properties
7.5.4.3 Existence and Franchises
7.5.4.4 Compliance with Law; Sanctions and Anticorruption Laws
7.5.4.5 Payment of Taxes and Other Obligations
7.5.4.6 Government Approvals
7.5.4.7 Substantive Consolidation
7.5.5 Use of Proceeds
7.5.6 Interest Rate Protection
7.5.7 Pari Passu Ranking
7.5.8 Further Assurances
7.6 Negative Covenants
7.6.1 Lien Covenant
7.6.1.1 Lender Liens
7.6.1.2 Grandfathered Liens
7.6.1.3 Permitted Encumbrances
7.6.1.4 Purchase Money Liens
7.6.1.5 Acquisition Liens
7.6.1.6 Secured Debt Liens
7.6.1.7 Non-guarantor Liens
7.6.1.8 General Lien Basket
7.6.2 Equal and Ratable Sharing Clause
7.6.2.1 Documentation Issues
7.6.2.2 Sharing Rights
7.6.2.3 Voting Rights
7.6.2.4 Collateral Agent
7.6.3 Negative Negative Pledge or Burdensome Agreements
7.6.3.1 Grandfathered Restrictions
7.6.3.2 Boilerplate Restrictions
7.6.3.3 Secured Debt Restrictions
7.6.3.4 Sale Restrictions
7.6.4 Debt
7.6.4.1 Lender Debt
7.6.4.2 Grandfathered Debt
7.6.4.3 Intercompany Debt
7.6.4.4 Purchase Money Debt
7.6.4.5 Acquisition Debt
7.6.4.6 Subsidiary Debt
7.6.4.7 Debt Basket and Ratio Debt Basket
7.6.5 Disqualified Stock
7.6.6 Fundamental Changes, Asset Sales, and Acquisitions
7.6.6.1 Fundamental Changes
7.6.6.2 Asset Sales
7.6.6.3 Acquisitions
7.6.7 Sale-Leasebacks
7.6.8 Investments
7.6.8.1 Grandfathered Investments
7.6.8.2 Cash and Cash Equivalents
7.6.8.3 Subsidiaries
7.6.8.4 Guarantees
7.6.8.5 Acquisition Investments
7.6.8.6 Investment Basket
7.6.9 Lines of Business
7.6.10 Derivatives
7.6.11 Guarantees or Contingent Liabilities
7.6.12 Dividends and Equity Repurchases
7.6.12.1 Stock Dividends
7.6.12.2 Subsidiary Dividends
7.6.12.3 Employee Stock Plans
7.6.12.4 Preferred Dividends
7.6.12.5 Dividend Baskets
7.6.13 Tax-Sharing Payments and Permitted Tax Distributions
7.6.14 Restrictions on Subsidiary Distributions
7.6.14.1 Grandfathered Restrictions
7.6.14.2 Permitted Debt Restrictions
7.6.14.3 Legal Restrictions
7.6.14.4 Sale Restrictions
7.6.14.5 Limited Customary Restrictions
7.6.15 Modification and Prepayment of Other Debt
7.6.16 Affiliate Transactions
7.6.17 Amendments to Organic Documents and Other Agreements
7.6.18 Fiscal Periods and Accounting Changes
7.6.19 Passive Holding Company
7.7 Incorporation by Reference
7.8 Covenant Lite
8 Guarantees and Security
8.1 Guarantees and Security Generally
8.2 Guarantees
8.2.1 Guarantees Generally
8.2.2 Guarantee of Payment versus Guarantee of Collection
8.2.3 Waivers
8.2.4 Subrogation
8.2.5 Reinstatement
8.2.6 Insolvency of Borrower
8.2.7 Continuing Guarantee
8.2.8 Summary Procedure
8.2.9 Guarantee Limitations and Rights of Contribution
8.2.10 Subordination
8.2.11 Limitations on Guarantee of Hedging Obligations
8.3 Collateral Packages
8.3.1 Conditions
8.3.2 Representations
8.3.3 Further Assurances Covenant
8.3.4 Lien Covenant
8.3.5 Defaults
8.3.6 Voting
8.3.7 Expenses
8.3.8 Agent Authorizations
8.4 Springing Liens
8.5 Collateral Allocation Mechanism
8.6 Deemed Dividends
9 Defaults and Enforcement
9.1 Events of Default
9.1.1 Default in Payment
9.1.2 Inaccuracy of Representations
9.1.3 Breach of Covenants
9.1.4 Cross-Default; Cross-Acceleration
9.1.4.1 Why a Cross-Default?
9.1.4.2 What Debt Is Crossed?
9.1.4.3 Meanings of “Cross-Default” and “Cross-Acceleration”
9.1.4.4 Mandatory Prepayments
9.1.5 Insolvency
9.1.5.1 Voluntary
9.1.5.2 Involuntary
9.1.5.3 Admission
9.1.6 Judgment Default
9.1.7 ERISA Events
9.1.8 Environmental Events
9.1.9 Change of Control or Management
9.1.10 Invalidity of Guarantees or Liens
9.1.11 Foreign Borrowers
9.1.12 Material Adverse Change
9.1.13 Specialized Events of Default
9.1.14 Significant Subsidiaries
9.2 Remedies
9.2.1 Stop Lending
9.2.2 Terminate Commitments
9.2.3 Accelerate
9.2.4 Demand Cover for Letters of Credit
9.2.5 Institute Suit
9.2.6 Demand Payment from Guarantors
9.2.7 Foreclose on Collateral
9.3 Rescission
9.4 Waterfalls
9.5 Setoff
9.6 Individual versus Collective Action
9.7 Lender Liability Risks
9.7.1 Breach of Contract
9.7.2 Creditor Control
9.7.3 Tortious Interference
9.7.4 Environmental Liability
9.7.5 RICO
9.7.6 Securities Laws
9.7.7 Wrongful Coercion
10 Interlender, Voting, and Agency Issues; Defaulting Lenders
10.1 Agency Issues
10.1.1 Appointment
10.1.2 Rights of Administrative Agent Individually
10.1.3 No Fiduciary Duty
10.1.4 Exculpation
10.1.5 Reliance
10.1.6 Delegation
10.1.7 Filing Proofs of Claim
10.1.8 Credit Bidding
10.1.9 Successor Agents
10.1.10 Collateral and Guaranty Matters
10.1.11 Syndication and Other Agents
10.2 Lender Indemnification
10.3 Voting
10.3.1 Basic Rule
10.3.2 Multitranche Agreements
10.3.3 Consents Requiring More Than a Majority
10.3.3.1 Money Terms
10.3.3.2 Pro Rata Provisions
10.3.3.3 Voting
10.3.3.4 Conditions
10.3.4 Unanimous versus Affected Lender Consent
10.3.5 Special Lender Consents
10.3.6 Collateral Security
10.3.7 Vote Splitting
10.3.8 Lenders That Default
10.4 Pro Rata Treatment
10.5 Sharing of Setoffs and Other Claims
10.6 The Clawback Clauses
10.7 Access to the Loan Register
10.8 Defaulting Lenders
10.8.1 Defining a Defaulting Lender
10.8.2 Disenfranchising Defaulting Lenders
10.8.3 Mitigating Fronting Bank Exposure
10.8.4 Forfeiture of Fees
10.8.5 Application of Payments
10.8.6 Removing Defaulting Lenders from the Syndicate
10.8.7 Removing a Defaulting Administrative Agent
11 Assignments and Participations
11.1 Distinguishing Assignments and Participations
11.2 Assignments
11.2.1 The General Rule for Successors and Assigns
11.2.2 Consent Rights over Lender Assignments
11.2.2.1 Defaults
11.2.2.2 Assignments to Lenders and Lender Affiliates
11.2.2.3 Assignments to Borrower Affiliates
11.2.2.4 Agent Consent Rights
11.2.2.5 Issuing and Swingline Lender Consent Rights
11.2.2.6 Unreasonably Withholding or Delaying Consent
11.2.2.7 Absolute Consent Rights
11.2.2.8 Consent During Primary Syndication
11.2.2.9 Other Considerations
11.2.3 Eligible Assignees and Disqualified Lenders
11.2.4 Minimums
11.2.5 Transfer Fees
11.2.6 Loan Register
11.3 Participations
11.4 Loan Pledges
11.5 Third Party Beneficiaries
11.6 Are Loans Covered by the Securities Laws?
12 The Boilerplate
12.1 Notice Provisions
12.1.1 Notices Generally
12.1.2 Electronic Notices
12.2 No Deemed Waivers
12.3 Cumulative Remedies
12.4 Colorado River Clause
12.5 Expenses
12.6 Borrower Indemnification; Consequential Damages
12.7 Governing Law
12.8 Enforcement Provisions
12.8.1 Jurisdiction; Process Agents
12.8.2 Venue and Forum Non Conveniens
12.8.3 Waiver of Sovereign Immunity
12.8.4 Waiver of Jury Trial
12.8.5 Judgment Currency
12.9 Severability; Counterparts; Integration; Captions
12.9.1 Severability
12.9.2 Counterparts; Effectiveness
12.9.3 Integration
12.9.4 Captions
12.10 Electronic Execution
12.11 Survival
12.12 USA PATRIOT Act
13 Borrower Rights
13.1 The Right That Lenders Make Loans
13.2 The Right That Lenders Mitigate Costs
13.3 The “Yank-a-Bank” Provision
13.4 Documentation from Lenders
13.5 Implied Covenant of Good Faith and Fair Dealing; No Implied Fiduciary Duties
13.6 The Right to Designate Additional Borrowers
13.7 Equity Cure Rights
13.8 Confidentiality
13.8.1 The Confidentiality Clause
13.8.1.1 Disclosure to Regulators
13.8.1.2 Disclosure Required by Law or Subpoena
13.8.1.3 Disclosure to Other Agreement Parties
13.8.1.4 Exercise of Remedies
13.8.1.5 Under Confidentiality Agreement
13.8.1.6 With Consent of Borrower
13.8.1.7 Information Already Public
13.8.1.8 Confidential Tax Treatment
13.8.2 Remedies
13.8.3 Use Restrictions
13.8.4 Destruction of Records
13.9 Loan Buybacks
13.9.1 Documentary Impediments
13.9.2 Overcoming Documentary Issues
13.9.3 Buyback Methodologies
13.9.4 Effect upon Amortization
13.10 Amend-and-Extend and Refinancing Facilities
14 Regulatory Developments
14.1 2013 Leveraged Lending Guidance
14.2 Agency FAQs
14.3 Impact of the Guidance
Appendix I – Table of Authorities
Appendix II – LSTA Model Credit Agreement Provisions
Appendix III – LSTA Form of Contractual Recognition Provision
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