Repeating Representations Loan Agreement

Negotiating agreements to be included in a loan or other facility agreement is particularly important for the borrower and the lender, since breach of contract can result in a default that may give the lender the right to renegotiate the loan or impose sanctions on the borrower1. The agreements control the actions that the borrower`s administration can take: Who have the potential to influence the lender`s interest rates.2 Thus, restrictions. B mergers and acquisitions are introduced so as not to alter the borrower/group with which the lender contracts, restrictions on the granting of loans/guarantees and the payment of dividends are also introduced to control the money the borrower pays to persons other than the lenders under the agreement. Alliances are acts or omissions that one party of the other party promises to make or not to make (i.e. positive alliances and negative alliances). The inclusion of guarantees in a loan agreement means that they become contractual obligations, some of which may result in a delay in the event of non-compliance. Agreements are generally negotiated in depth by lenders to ensure that the borrower maintains the status quo, particularly with respect to the financial health of the business. Agreements give lenders some degree of control over the borrower`s activity. You must be attentive to the date on which you must repeat the representations and guarantees. Because you have to make sure they are correct every time you have to confirm them.

In addition, borrowers who have revolving credit facilities or phased deductions as part of a long-term credit facility generally have to repeat representations before each rollover advance/withdrawal and comply with stricter representations (e.g. B a presentation that there is no «potential default» before any increase in subscriptions). Of course, under this type of loan agreement, a borrower may normally be required to pay back the full loan immediately if he or she cannot give it. Borrowing financing can be critical to the day-to-day operations of a business and to a powerful expansion tool, but borrowers should be wary of pitfalls in credit documents that could affect their business. Careful attention during the design phase of the loan agreement can avoid unintended consequences in the future. Borrowers and potential borrowers are encouraged to cooperate with their legal and financial advisors throughout the negotiation and loan design phase, as their participation can help ensure the smooth operation and effectiveness of the borrower`s activities over the life of the loan. All cash flow-based financial agreements (i.e. based on EBITDA) are likely to be a challenge at this time, and the financial obligations of the «value credit» parties will be difficult for the parties to monitor, as surveyors are unable to conduct full inspection assessments.

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