Drafting Effectively - Facility Agreements

• Facility agreement concepts can be difficult to adapt to quickly, which can affect the ability to draft and negotiate documents effectively. By examining the commercial structure of facility agreements, this course builds on the key concepts essential to approaching drafting from a solid foundation.
• The course examines some of the key pitfalls in drafting facility agreements in one session that would ordinarily take months or years of experience to acquire.
• Our trainer has many years’ experience in training and mentoring junior lawyers and has a unique insight into the drafting problems that they encounter in practice.

This course will look at among other things:

• what you need to understand commercially before you even look at a term sheet and how that potentially impacts on how a deal will be negotiated;
• understanding the underlying deal in the context of it sitting within any wider financings;
• how to start with the right precedent/template (a common source of cost overruns and irrecoverable fees);
• disseminating information from term sheets into drafting and why approaching drafting from ‘data’ type saves drafting time;
• best practice for collating and presenting clarification points when sharing first drafts with clients;
• how to approach turning a borrower’s mark up into the ‘next draft’ and the importance of understanding the commercial structure of a facility agreement;
• how other finance agreements may impact on your drafting decisions;
• the use of ‘middle ground’ drafting (e.g. reasonable endeavours clause), when it may be appropriate to use it and how it affects risk allocation between the parties;
• the growing role of document automation technology, its pros and cons and what you must never assume when using it.

Case law and exercises may be used to highlight particular issues.

This course is not a clause by clause-by-clause page turn of a facility agreement, but by examining key drafting principles and examining how facility agreements fit together commercially, it will help you to acquire a set of core key principles that you can apply and adapt to different financing scenarios to draft and negotiate more effectively.

Getting to grips with the commercial background and philosophy of the parties

• Why does it matter who the parties are?
• What do you need to understand the economic cycle?
• Why taking an interest in the current market matters
• New borrower, old borrower – what’s to distinguish?
• What’s the deal philosophy?
• At the end of the day, the balance sheet matters – why?
• Understanding lender/borrower risk and lender/lender risk
• Why is this all relevant to drafting?

Understanding the deal in context

• Credit papers vs term sheet – what’s the difference?
• What you need to know about credit papers & term sheets and why size could matter
• Why do you need to ask questions?
• The information that could drive a coach and horses through your drafting and which you must consider on day one
• Drafting elephant traps hidden in the term sheet
• The difference between ‘Credit Speak’ and ‘Legal Speak’
• When is the right time to clarify term sheet detail?
• Do you need a drafting timetable?
• Who is instructing you & what are your instructions?
• The role of critical thinking at the term sheet stage
• The usefulness of publicly available information – demonstrating that you can think differently

Understanding the facility agreement template/precedent from a commercial perspective

• The facility hexagon – why you must know these six parts of any facility agreement
• Why understanding the facility hexagon makes drafting facility agreements easier
• Dissecting the facility hexagon – what are the sub-components?
• What influences your starting document? How to pick the most appropriate template
• Understanding gaps in precedents and approaches to plugging the gaps
• How do you choose between bank templates and LMA (Loan Market Association)/industry templates & what are the commercial drivers?

Approaching the first draft

• Demystifying drafting fears – a round table discussion
• Where do you start?
• Visualising the jigsaw pieces
• Getting to know data types:
• information inserts
• structural changes
• combinations of both
• The role of document automation in the production of the first draft – understanding the automation questions
• Dealing with sticking points – wrong template or a missing clause?
• Reviewing the draft:
  • Tick back against the term sheet
  • Square brackets – how do you sense check?
  • Why checking cross-referencing matters
  • Definitions
  • What’s your interpretation?
  • Confidential bits and pieces
  • Syndicated facilities – who are you reviewing for?
• Compare and contrast – starting drafting from the front page or elsewhere

Tabling discussion points for the client

• Putting yourself in the client’s shoes
• Imagining the client internally
• Why understanding ‘client style’ is important
• What are the potential different approaches?
• Distinguishing between legal drafting points and commercial drafting points in facility agreements
• Should you leave open-ended points in the drafting?
• Refining ‘legal speak’ into ‘commercial speak’ – avoiding legal regurgitation
• The all-important second term sheet sense check

Dealing with borrower comments

• Demystifying the Borrower mark up
• Analysing the markup. How do you approach reviewing Borrower comments?
• Recall of the facility hexagon
• The term sheet sense check
• How do you develop an idea of what to concede and what not to concede? The cash flow/exit test
• The ‘this is the market’ argument – does it work? Is it appropriate?
• Developing a feel for the Borrower’s position & unexpected curve balls – how other deals get in the way
• How do you approach making recommendations to a client?
• Risk allocation - commercial risk vs legal risk and understanding how legal risk crystallises
• Going through comments with the client and recommendations - suggested approaches and strategies
• Someone has to ultimately make a decision – helping the decision-making process vs hindering it

Getting the deal over the line - Understanding legal ambiguity & risk allocation

• The lawyer’s paintbox – drafting tools
• How to use the paintbrush whilst respecting the Borrower’s position
• Examine the sticking point, including cross border aspects.
• Understanding the Borrower’s business
• Shades of reasonableness - Rhodia v Huntsman and other cases
• The risks with consent mechanics – The risks from the case of Watson & Ors v Watchfinder.co.uk Ltd
• Agreements to agree – the case of May and Butcher v R and subsequent possibilities
• Material adverse effect
• Unilateral rights
• Where does the risk lie?
• Legal ambiguity in cross-border deals
• Clarity of explanation
• Where side letters may help

The use of technology - pros and cons

• Types of drafting technology
• What does drafting technology do?
• What does drafting technology not do?
• Why you still need to understand the facility hexagon and the template
• Understanding the automation questionnaire when using document automation
• The importance of the redline when relying on drafting technology

The drafting effectively facility agreements webinar trainer is a highly experienced and sought-after lawyer, advisor, educator, mentor and writer. For almost 30 years and across several different industries, he has written and delivered a wide range of bespoke training courses for individuals, businesses, professional associations and educational establishments.

Over a 20-year legal career, he has advised banks & financial institutions, asset and receivables financiers, alternative lenders, large and SME corporates, private equity houses, pension trustees, regulators, guarantors and private individuals on a wide range of complex UK and international cross-border banking and finance matters on transactions with individual values of in excess of £2 billion. These have included global loans, investment grade lending, leveraged finance acquisitions, real estate investment & development finance, asset and receivables finance, bridge finance, private wealth finance, project finance, securitisations, social housing finance, trade finance, higher education finance, intragroup lending, netting and cash pooling arrangements and general corporate lending transactions including cross border syndicated and club deals. He has also advised on directors’ duties issues, restructurings and complex multi-layered intercreditor arrangements.

The trainer completed his formal training and qualified as a banking & finance solicitor in Leeds at Cobbetts LLP in 2005, before moving to London in 2007 to continue his career at Denton Wilde Sapte LLP (now Dentons) and subsequently with Wragge & Co LLP (now Gowling WLG (UK) LLP).

He moved to an in-house counsel role at Barclays Bank PLC in 2010, working in their Sales Finance and Trade & Working Capital Finance teams, advising on a wide range of UK and international receivables finance, inventory finance, securitisation and other asset finance matters (including invoice discounting, factoring, recourse and non-recourse financing, selective receivables finance, supply finance and full asset-based lending agreements). He also worked on secondment with the HSBC (UK) Invoice and Equipment Finance legal and business teams, advising on UK and cross border receivables and asset based lending transactions, including hire purchase, lease finance and asset purchase finance.

In 2015, he returned to Gowling WLG (UK) LLP, to become a professional support lawyer in their banking & finance team, responsible for education & training, knowhow, implementation of legal technology and providing cross-jurisdictional advice on complex areas of law. He has also written and delivered training for several professional associations including the Loan Market Association and the American Intellectual Property Law Association (AIPLA).

Having worked both in private practice and in-house with leadership, sales, relationship, risk, compliance, legal, transaction management, operations and product teams, the trainer understands the obstacles that need to be overcome on transactions and how to get deals over the line successfully. Consequently, his training focuses on providing students with the essential foundations, commercial awareness and approaches to thinking which are necessary to achieve this.

The trainer sits on an advisory board for a major legal publisher and advisory panel for a leading international banking and finance journal. He has also sat on the legal & technical committee for ABFA (now UK Finance).

He has also participated in a number of major law reform projects and consultations including the University of Oxford led Secured Transactions Law Reform project, the City of London Law Society’s Secured Transaction Code project, the UK Jurisdiction Taskforce consultation on crypto-assets, distributed ledger technology and smart contracts and the England & Wales Law Commission’s calls for evidence on smart contracts and digital assets. He has also participated in several UK Government legislative consultations.

As a mentor, he has also worked on the law firm panel at Barclays Eagle Labs Legal Tech Hub, London providing help and support to a wide range of new start-up legal-tech businesses from the UK and overseas.

With increased pressure on lawyers to provide greater value for money to their clients and time pressures on supervision, understanding how to draft facility agreements effectively is a key part of every banking & finance lawyer’s tool kit. It is also important for those lawyers who are involved in the review, negotiation and drafting of changes to facility agreements during a transaction, as the ability to translate commercial intention into drafting quickly and concisely and to advise on potential areas of risk in drafting is key to protecting a client’s position.

This unique drafting effectively facility agreements seminar is primarily aimed at lawyers who are new to drafting loan facility agreements, lawyers who want to gain a better understanding of the interplay between drafting, negotiation and commercial awareness and for any lawyer who wants to improve their ability to explain the mechanics of a loan facility agreement and the impact of drafting in plain English (a skill that is of fundamental importance to all lawyers, particularly in an age where drafting is becoming more automated). This course will allow lawyers to examine their drafting habits and provide practical and useful suggestions to raise awareness of how it can be improved.