Facility Agreement Conditions Precedent

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If the lender decides to borrow money without all the relevant conditions being met, the conditions of the deferral should be recorded in a subsequent letter or waiver letter. A subsequent letter on the terms will allow the remaining conditions to be met at a later date, after the date of the loan transaction. If the conditions are not met on the date indicated, this is a standard event. Subsequent terms can also be recorded in the facility agreement by adding a new clause, but this can only be done if the agreement has not yet been concluded. As a general rule, a separate letter is the simplest option. In the case of a syndicated loan – a loan provided by more than one bank to which an agent is responsible for coordinating business – the agent receives the terms of the precedent and authorizes them on behalf of the Union. Another example of ongoing conditions is that of a real estate development facility that draws funds against the certifications of the contractor/agent (and certain other positions) that must be provided before each loan. Preconditions are also a way to secure funds threatened by the lender. The conditions include all the authorizations and authorizations necessary for the operation of the borrower`s business. These offer comfort on two levels: first, they confirm to the lender that the borrower is able to do his business and finance the credit repayments. Second, in the event of a default on the loan, the borrower will know that he has all the necessary documents to continue the borrower`s activity (whether by appointing an insolvency office holder or selling the business to a third party) and to repay the loan on the product. A facility agreement – the agreement between the borrower and the lender that documents the credit facilities – will generally include a precedent clause. The conditions themselves are then indicated in a calendar.

A waiver letter simply confirms that, notwithstanding the terms of the loan agreement, the lender no longer requires the borrower to meet certain conditions and not waive them. This can also be done by removing the conditions removed from the timetable of the facility agreement, but it also depends on the finalization of the facility agreement. A borrower will want to ensure that the framework conditions are well defined and objective in order to be able to meet them. Where possible, the necessary form of documentation should be agreed in advance. When third-party reports are to be submitted to the lender, the borrower should take steps to ensure that the third party knows, as far as possible, that they must submit their report to the lender and, if requested by the lender, forward the report to the lender. Many lenders have a preferred formulation for addressing reports. The terms of the precedent should normally be “satisfactory in terms of form and content for the lender.” When this text is added, the borrower should ensure that it receives written confirmation from the lender if all the conditions are met, so that there is no dispute as to whether the lender was satisfied or not.