A negative pledge is a blanket prohibition on collateral and generally includes any other agreement under which a third party could acquire a better right to the borrower`s assets than the lender. This protects the lender`s position from other creditors. Negative liabilities generally cover the borrower and all its subsidiaries. Borrowers can also negotiate a number of exemptions known as “legitimate security interests.” As a general rule, there are “standard” trading points that are advanced by borrowers, for example. B a standard definition of major adverse amendments/effects generally refers to the effect that may affect the debtor`s ability to meet his obligations under the facility contract. The borrower may attempt to limit this obligation to his own obligations (and not to other obligations), the borrower`s payment obligations and (sometimes) his financial obligations. Delay events essentially give the lender the contractual right to “accelerate” repayment without recourse to the courts and the power to terminate the loan upon discovery of an infringement. Businesses or financial alliances govern the borrower`s financial situation and health. They define certain parameters in which the borrower must operate. The borrower`s auditors should be asked to view their contents as soon as possible. The dates on which these companies are subject to review should be subject to scrutiny, as should the separate financial definitions applicable. Financial commitments are a key element of any facility agreement and are probably the most likely to cause a default event if they are breached.

Stronger borrowers can negotiate a right to resolve violations of financial pacts, for example by investing more money in the business. This is called the equity cure. Interest is due at the end of each interest period, interest periods may be fixed periods (usually one, three or six months) or the borrower can choose the interest period for each loan (the options are usually one, three or six months). Late interest (the interest rate a borrower must pay in the event of a substantial breach of credit agreements) is generally calculated with an additional 1% margin, but if the borrower is unable to apply for a discount, he or she should ask for additional time. A facility agreement can be subdivided into four sections: it is generally necessary for the borrower to transmit “in a form and substance satisfactory to the lender all the documents and information it needs before it can apply for use to use funds.” Terms such as “and other information that the lender may require” should be avoided by the borrower, since if the conditions are not met, the lender has the right to withdraw from the loan return. Default events: These will be voluminous. However, there are good reasons for them and, if negotiated properly, they should not allow the loan to be used unless there is a serious breach of the facility agreement. Representation and guarantees are generally repeated at regular intervals to ensure that the borrower`s status remains unchanged throughout the agreement. Lenders want this to apply on a daily basis throughout the loan, but borrowers want it to apply only to the counting and interest payment dates. The lender`s decision to lend is usually determined by the answers to the borrower`s questions and the answers the borrower must justify.

The subsequent breach of one of these guarantees is generally considered a case of delay and the lender has the right to take all measures, as agreed in the agreement. The purpose of these guarantees is to ensure full disclosure by the borrower to the lender. Alliances need to be carefully considered, as they could limit the borrower`s activity if they are formulated too harshly or if they are too soft