The LSTA's Complete Credit Agreement Guide, Second Edition

Description

The new edition of this popular guide provides the tools you need to navigate the radically altered, post-meltdown world of credit   Originally published in 2009, when the banking industry was in major turmoil, The LSTA’s Complete Credit Agreement Guide has been comprehensively updated to address all the changes that have taken place over the past seven years.   The loan market is no longer dominated by traditional banks; today’s lenders also include retail loan funds, structured vehicles like CLOs, and numerous other hedge funds and distressed funds--all of which is explained and updated in this new edition. You will learn all of the essentials in understanding today’s typical credit agreement versus that of seven years ago.   Cover Title Page Copyright Page Dedication Contents Preface 1 The Credit Agreement 2 Commitments, Loans, and Letters of Credit 2.1 Credit Variants 2.1.1 Loans 2.1.2 Letters of Credit 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 2.2.5 “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 2.4.3 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 3.1.3 Competitive Bid Loans 3.1.4 Other Pricing Options 3.1.5 Applicable Margins 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 3.7.4 Illegality 3.7.5 Breakfunding 3.7.6 Taxes 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 5.1.12 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 7.4 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 7.4.4 Performance-Based Financial Covenants 7.4.5 Hybrid Financial Covenants 7.5 Affirmative Covenants 7.5.1 Disclosure Covenants 7.5.2 Inspection Rights 7.5.3 Insurance 7.5.4 Miscellaneous “Who-Can-Object” Covenants 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 7.6.2 Equal and Ratable Sharing Clause 7.6.3 Negative Negative Pledge or Burdensome Agreements 7.6.4 Debt 7.6.5 Disqualified Stock 7.6.6 Fundamental Changes, Asset Sales, and Acquisitions 7.6.7 Sale-Leasebacks 7.6.8 Investments 7.6.9 Lines of Business 7.6.10 Derivatives 7.6.11 Guarantees or Contingent Liabilities 7.6.12 Dividends and Equity Repurchases 7.6.13 Tax-Sharing Payments and Permitted Tax Distributions 7.6.14 Restrictions on Subsidiary Distributions 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 9.1.5 Insolvency 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 10.3.4 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 11.2.3 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 13.8.2 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 Index A B C D E F G H I J K L M N O P Q R S T U V W Y