Amendment to Facility Agreement

If the modification is of a type provided for in the guarantee or security right and falls within its general scope, it is theoretically not necessary to assume a new guarantee or security right or to require confirmation. However, given that existing case law, including Triodos Bank NV v. Dobbs[4], does not provide definitive guidance in this area, a cautious approach is required, including a careful examination of the specific factual scheme of the initial transaction and the proposed amendment. If, as a result of this verification, there is a concern that the deviation may not be reflected in the original documentation or that it may not be outside its general scope, a new warranty or guarantee should be provided. If such concerns do not exist, it is always good practice to seek a security guarantee or confirmation (if any) to prevent the guarantor or obligated party from making the point later. In the United States, lenders often require guarantors and guarantors of guarantees to ratify guarantees and security related to increases in the nominal amount of loan obligations, term extensions, additions of tranches under a loan agreement, and other significant changes to economic conditions, although such ratifications are not considered necessary for the guarantee or guarantee to be security may extend. to the modified debt. Such ratifications are not normally requested under other provisions, including a single change in the interest rate, unless the amount and maturity of the debt are changed, and it is not expected that such ratifications will be necessary or otherwise necessary in connection with the transition to a DPR, unless further changes to the underlying debt instruments are made at the same time as that transition. become. As the term suggests, the guarantee of “all funds” usually includes “all funds” owed by the principal debtor to the lender (including any obligations that arise in the future).

In principle, the guarantee of “all amounts” should guarantee modified obligations without the need for a new guarantee. However, it is advisable to obtain written confirmation from debtors that the existing guarantee remains in full force and effect despite the changes. Such confirmation should always be obtained when the amount of debt is increased. For lawyers, the question therefore arises as to whether confirmations of guarantee and pledge are required if the amendment to the applicable loan agreement concerns exclusively the transition from an IBOR for a particular currency to the corresponding RFR. The response will be specific to the documents and jurisdiction governing the warranty or security agreement. In this article, we look at the situation in two jurisdictions: the United States and England. It makes sense for a borrower to contact the lender or installation agent as soon as possible to avoid delays. A lender may need to obtain credit approval for the proposed changes, or a facility agent may need some time to contact and contact the consortium`s lenders about the changes. It`s always worth considering how these factors can affect timing. However, given the nature of the proposed amendments and the current urgency, a commercial perspective may be adopted. A lender still enjoys fairly extensive protection under the Companies Act, 2006 (ss.

39 and 40), which allows it to assume that a document signed by a corporation under the Companies Act has been duly approved. In most cases, this should allow a lender to make the change, even if those additional receipts are not received. However, you should conduct a business search and credit check to ensure that no insolvency action has been taken. Many of these facility agreements were created by external advisors using the Loan Market Association or their own models. In these circumstances, it is important that all changes are handled by external legal counsel as easily and cost-effectively as possible. In the case of bilateral facilities, the modification agreement is concluded between the borrower and the lender. In the case of unionized facilities, the installation agent generally enters into the modification agreement with the borrower as an agent of the other financial parties. The need to modify a large number of old transactions to reflect a transition from UTRs to RFRs requires facility agents, lenders, borrowers, and law firms to invest a lot of time and money, even using artificial intelligence (“AI”) tools. This problem will be exacerbated if, in addition to the modification of credit agreements, guarantee and collateral confirmations as well as legal opinions from different jurisdictions must be obtained. This is likely to be particularly important for cross-border transactions involving multiple debtors and jurisdictions. Despite the potential help of AI with some elements of the transition to IBOR abandonment, it is difficult to see how this task can be automated given the variety of safeguards and jurisdictions that may be applicable to individual transactions.

The vast majority of changes currently required by lenders (p.B. moratoriums on principal repayment, interest and fee reductions, and waivers or resettings of restrictive covenants) benefit both the borrower and the guarantor. From a commercial point of view, it is therefore very unlikely that a guarantor will ever attempt to challenge such a change in the future on the grounds that he did not accept it at the time. In addition, most standard form guarantees include “all funds” and indemnification provisions that the courts have determined to protect a lender that makes changes to a facility of the type proposed above. Blake Morgan is available to help you document these changes. If you have any installation agreements that you may need to change (subject to loan approval or otherwise), please contact Steve Cole or Kath Shimmin. There may be other influencing factors. For example, it may be necessary to amend and adapt the old provisions for older facilities to bring the terms into line with current donor policy requirements or applicable law. In any case, it is important to consider what is the most pragmatic and cost-effective approach.

There are a number of factors to consider. For example, the significance of the changes or whether the definition of “financial records” in the existing facility agreement includes future records. The basic principle to consider is whether the security is “all funds” or “specific funds”. For example, an existing inter-creditor agreement may need to be reviewed to ensure that it allows you to defer capital repayments under your facility (which may result in the commercial blocking of subordinated lenders` financing for longer). In syndicated agreements, a capital repayment holiday may require the consent of all syndicate lenders. Ultimately, it is not possible to answer this question in general – every transaction must be carefully evaluated, with the help of lawyers from each relevant jurisdiction. In many cases, the parties may take the opportunity to include other changes in their documents, not just those relating to the IBOR transition, and if this is the case, this will further complicate the discussion and increase the likelihood that a new security and/or security right (or confirmation of the existing security and/or security) may be required. However, if the IBOR transition is envisaged at the beginning of the development, in many cases it should be possible to perpetuate the original documents in order to minimize the likelihood that a new warranty or guarantee will have to be concluded, or to obtain a guarantee or security confirmations, and we have already advised several customers accordingly. Given the current requirement that most people have to work from home, questions arise as to whether documents can be signed electronically. In most cases, the electronic signature is an acceptable method of signing a letter of amendment.

This can go a long way in ensuring that these changes are documented as quickly as possible. For more information on running documents remotely, click here. The best form of documentation depends on the type of changes. For minor changes, a change agreement (or letter) may be appropriate. For changes that are larger and more complex, a modification and adaptation agreement may be more appropriate (it effectively replaces the existing installation agreement). When it comes to modifying financial documents to reflect the transition from an IBOR to an RFR, one of the stated objectives of the working groups is that the change in the reference interest rate should have neutral economic effects. Given that, to the extent that a change in the reference rate is the only change made and the existing installation agreement includes some form of AML wording “Screen Rate Replacement” or equivalent, it can be strongly argued that the change has been reflected in the existing documentation and that the facility is not outside the general scope of the warranty or guarantee […].