Advanced Legal Writing: Contract Drafting Lesson 11

Generic imbalance of power

Credit facility like a credit card, allows you to withdraw money and pay interest on the amount of money
withdrawn
Shareholders in that company were very complicated
The more shareholders you have, the crazier you get
Financing agreements you can have them in acquisitions
o When you are refinancing, you keep whatever rank you have
o When the company files bankruptcy
o If company is not doing well, there are specific agreements that the company will need to consent to
Purpose is very important want the money to go to the exact purpose of the project itself
Warranties will also be different
There are several facility agreements that are financing this project want to claim all at the same time
Lender
o How do we decide between one lender and several lenders? basically an idea of risk
o Generally there is one leading entity that helps you negotiate such agreements
o Peer pressure really works as well
Combine syndicated loans with bilaterals
For the borrower depending on the transaction, you might have on or several
o Generally for such big projects, you might have several providing personal securities or guarantees
Utilisation conditions and how you are allowed to draw down money only applicable to credit
o Which period you are allowed to draw down money and on what days?
o How we define utilisation?
Material adverse change an event that changes the circumstances of the relationship
o Scope for people not to comply with the contract is very low
o Force majeure in the UK, you have the theory of frustration which does not necessarily apply in
Spain
o Contractual way to solve the situation defining between the parties what events happen in real life
Event of default appointment of receiver to run the company
o Cross default with other finances that the company might have
o Representations and warranties specific to the company and remain true
In Spain, you have a limitation for the interest
Interest period period in which you have to pay interest, capitalise other interests
Fees you dont only pay fees for the agency, you pay for restructuring, refinancing
Do I have to notify the 14 banks? Have one bank appointed to be the agent, filters all the notices and
information between the two parties
Voluntary repayment VS mandatory repayment
o If you want early repayment, might have to pay an early repayment fee
At the end of the year, if there is money left in that bank account, the bank will just sweep the cash cash
goes to the payment of the debt this is known as a cash sweep

Project: Power plant in Almeria

Sponsor: ENDESA
If ENDESA is the borrower as opposed to the SPV, which is more risky from the point of view of the bank?
The more risk, the higher the spread
The less risk, the lower the spread
Reduce the risks of ENDESA generally, so that the assets will not be compromised if something goes wrong
Who gets to draft out the financing agreements?
Set of documents:
Loan/Credit agreement
Hedging agreements
Operative covenants:
Use of funds
Compliance with project contracts
Insurance
Sole business type of covenant
Restricting the SPV from taking a loan from another bank (indebtedness)
Off take contracts
Negative pledge do not allow them to create security interest over their assets

What is the consequence of having an event of default? Event of default acceleration 2nd year
Security documents in rem VS personal guarantees

For security interest, the ranking is determined by the date the security interest is created
Sale of the project
What if the power plant suffered a fire and gets destroyed? lost the power plant but gets proceeds
Repayment, substitute the asset
If you allow voluntary prepayments to occur
Penalty for early payment
There is a revenue stream previously promised that I am no longer going to earn

This project in Year 3 has significantly less risk attacked to it than in Year 0

BATNA Best Alternative to a Negotiated Agreement

If you understand what the BATNA of the other party is, you would be in a better position whether you have to
concede to particular issues?