Course NAME: Loans & Syndicated Credits
Course code:
Course Description
Despite the emergence of the Capital markets as the alternative source of finance, commercial banks and private equity companies (‘financiers’) remain the major source of funding for corporate borrowers in Kenya. Financiers negotiate on a daily basis numerous transactions in form of term loans, overdrafts, lines of credit and occasionally syndicated credits. The purpose of this course is to describe in detail the legal issues arising in term loans andsyndicated credits in the wholesale market in favour of corporate and governmental borrowers – not small or medium-sized private companies The objective is to help in the understanding of legal and commercial risks in the loan contract that would often lead to expensive litigation or arbitration if not properly identified and dealt with. This course targets in-house counsel (in state corporations, parastatals, semi autonomous government agencies, commercial banks, mortgage companies), transactors in corporate finance in commercial banks and mortgage companies, commercial legal practitioners, investment bankers, and private equity firms.
introduction to Bilateral Loans
introduction to Syndicated Loans
- Parties
- Mandate
- Functions of arranging bank
- Summary of syndication principles
- Solicitation of Participants
- Preparation of Syndication Loan Information memorandum
- Misrepresentation liability
- Exclusions of liability.
- Confidentiality
Types Of Credit Facilities
- Corporate working capital finance
- Sovereign loans
- Loans to special purpose companies
- Credit agreement difference.
- Acquisition finance
- Leveraged bid finance.
- Aircraft and equipment lease finance
- Project and construction finance
- Real property finance
- Securitisations
- Ship finance
- Letter of credit, guarantee and bond facilities
Typical Clauses In A The Loan Contract
- First demand clause
- Indemnity clause
- Acceleration clause
- Foreign exchange facilities clause
- Agreement to lend clause
- Conditions precedent clause
- Remedies for bank default clause
- Specially contemplated losses clause
- Drawdown of loans clause
- Multicurrency option clause
- Application of proceed clause
- Repayment clause
- Prepayments and cancellation clause
- Premiumsclause
- Borrower cancellations clause
- Mandatory prepayments clause
- Illegality clause
- Interest clause
- Interest periods clause
- Margin clause
- Market disruption clause
- Fees and expenses clause Payments clause
- Netting
- Clause
- Claw-back clause
- Appropriations clause
- Set-offs by borrower clause
- Margin Protections clause
- Tax grossing-up clause
- Return of tax credits clause
- Borrower protections clause
- Stamp duties and other taxes clause
- Increased costs clause
- Currency indemnity clause
- Default indemnity clause
- Representations and Warranties clause
- Commercial warranties clause
- Covenants (Undertakings) clause
- Lender liability clause
- Subsidiaries clause
- Information clause
- Negative pledge clause
- Automatic security clause.
- Pari passu clause
- Disposals clause
- Financial covenants clause
- Liquidity tests clause
- Other covenants clause
- Events of Default clause
- Cross-default clause
- Actual insolvency clause
- Material adverse change clause
- Change of control clause
- Subsidiaries and guarantors
- Syndicate Agent Clause
- Transfers clause
- Pro Rata Sharing Clause
- Miscellaneous Clause
- Execution clause
Course Name : Loans transfers and participations
Course code:
Course Description
This course describes aspects of the grant of participations by a lender to another bank (or non-bank entities) in a loan or other credit facility already entered into. Under the usual method of syndication, all the banks sign the loan agreement. But an original bank may wish to transfer a loan subsequently, e.g because there was no time to syndicate; because general syndication was prevented by the confidentiality required for a loan to finance a public takeover; to avoid over-exposure to a borrower; to diversify a loan portfolio; to make a profit out of trading loans, eg by retaining part of the margin; to remove assets which would attract a capital adequacy requirement so as to make room for more lending without having to raise fresh capital; to restructure the banking group by transferring loans to an affiliate; to transfer its assets to a more favourable tax jurisdiction; to enable a bank to transfer loans to a counterparty from whom the bank has bought credit protection in the credit derivatives market; to securitise loans; to transfer non-performing loans to a government agency or to a central bank to support a lender of last resort facility as part of a bank rescue operation; or to rid itself of distressed loans in favour of a specialist institution willing to spend time and expertise on recovery.
For all these reasons, the marketability of loans is essential, as with virtually all types of business property. A borrower may wish to restrict transfers in order to maintain its relationship with a particular bank.