Drafting Effectively - Receivables Finance Agreements

The key principles of receivables finance using a receivables purchase structure

• Understand the key terminology of receivables finance agreements
• Assignments and true sale – the case of Re George Inglefield Ltd
• Utilisation & controls around utilisation
• Early Payments/Advances/Availability
• Designating receivables – the different classes of receivables
• Concentration limits
• Accounts and collection from debtors
• The suite of representations and warranties
• Default triggers and rights
• Recourse rights and exit
• Operational requirements
• Key differences between loan agreements and receivables finance agreements

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

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

Understanding the underlying deal in the context

• Credit papers vs term sheets – 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

Understanding the receivables purchase agreement template/precedent from a commercial perspective

• Visualising the receivables finance agreement from above – why you must know these key parts to how a receivables finance agreement fits together
• Why the visualisation process makes drafting easier
• Visualising the sub-components – further pieces of the jigsaw
• 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 receivables financier templates vs larger templates & what are the commercial drivers?

From the term sheet to the first draft

• Demystifying drafting fears on receivables finance agreements – a round table discussion
• Where do you start?
• Visualising the receivables jigsaw pieces
• Understanding different types of data in the context of receivables purchase agreements
• Understanding the use and limitation of document automation for receivables purchase agreements
• Dealing with sticking points – wrong template or a missing clause?
• Reviewing the receivables finance agreement
• Differences in approach from loan facility agreements
• Tick backs to a term sheet
• The extra importance of cross-referencing in receivables finance agreements and the use of override conditions
• Definitions and their impact on utilisation and availability
• Confidential bits and pieces
• Dealing with syndicated and club facilities

Tabling discussion points for the client

• A look at some best practice ideas
• Analysing client style and your ultimate audience (writing for all audiences)
• Distinguishing between legal and commercial points
• Making recommendations vs ‘sitting on the fence’
• The all-important second term sheet check

Dealing with comments on the first draft & key negotiation areas

• Understanding key negotiation areas:
  • Committed vs uncommitted funding
  • Commercial risk analyses of drafting changes with an indirect impact on funding
  • Issues with debt-specific warranties
  • Issues with the credit-worthiness of a debtor
  • Variations to terms
  • Notification of debtor triggers
  • Dealing with breaches of operational covenants
  • Cross default
  • Exercise of discretions
  • Security packages
  • Cross border receivables
  • Scope and extent of general undertakings and representations
  • Access rights
  • Exit costs
  • Recourse vs non-recourse agreements
  • Interplay with other financing agreements
• Analysing the markup – how do you develop an idea of what to concede and what not to concede?
• This is market – is it a valid argument?
• Going through the comments with the client and recommendations – suggested approaches and strategies
• Understanding the client – who has the final say?
• Selective receivables vs the whole turnover – how does it differ in approach?

The impact of the Business Contract Terms (Assignment of Receivables) Regulations 2018 on receivables finance agreements

• What do the regulations do?
• Why are they relevant to receivables finance agreements?
• Do they necessitate any particular areas of protection in receivables purchase agreements?

Getting the deal over the line

• Examining sticking points – are they problem-led or fear-led?
• Understanding the nature of the business being funded – cyclical vs non-cyclical businesses
• The use of ‘reasonableness’ in drafting middle ground
• Are consent provisions always absolute protection? The case of Watson & Ors v Watchfinder.co.uk Ltd
• Agreements to agree and unilateral rights
• Where does the risk lie?
• Legal ambiguity in cross-border deals
• Can side letters help?

Our 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, property developers, pension trustees, regulators, government departments, directors and private individuals on a wide range of banking and finance related matters.

These have included UK and international cross-border syndicated, club and bilateral finance transactions with individual values exceeding £5 billion. His experience spans many specialisms including global loans, investment grade lending, leveraged finance, real estate investment & development finance, asset and receivables finance, bridge finance, private wealth finance, project finance, securitisations, bond issues, social housing finance, trade finance, higher education finance, intragroup lending, director and shareholder loans, guarantee & security packages and netting and cash pooling arrangements in addition to general advisory work. He has also advised on refinancings and restructurings involving complex multi-layered intercreditor arrangements and directors’ duties-related issues.

As an English law qualified solicitor, our trainer has worked in private practice at Denton Wilde Sapte (now Dentons), Gowling WLG, Wragge & Co. and Cobbetts and he is currently a partner at Gunnercooke.

As in-house counsel, he worked for several years at Barclays Bank PLC 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 has 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.

During his time at Gowling WLG, our trainer worked as PSL Legal Director and provided education, training and advice on complex areas of law across the firm. He was also responsible for risk monitoring and developing and maintaining know-how, precedents and practice & briefing notes, in addition to assessing, piloting and implementing various legal technology tools.

He has written and delivered banking and finance-related and legal training for lawyers and non-lawyers alike of all levels of experience and several professional associations including the Loan Market Association. Having worked both in private practice and in-house with leadership, sales, relationship, risk, compliance, legal, transaction management, operations and product teams, he 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 participants with the essential foundations, commercial awareness and thought processes necessary to manage and run transactions effectively and with minimum risk.

Our trainer writes regularly on banking and finance and legal technology-related topics and he sits on the editorial board for Butterworths’ Journal of International Banking and Financial Law. He was also a member of the PSL advisory board for Lexis PSL’s banking and finance module from 2017 to 2023 and has also sat on the ABFA (now UK Finance) legal and technical committee.

He has participated in numerous 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 provided input into several UK Government legislative consultations.

As a mentor, he has helped the development of many lawyers and young professionals and he has also been a member of the law firm panel at Barclays Eagle Labs Legal Tech Hub, London providing help, support and pro-bono advice to a wide range of new start-up legal-tech businesses from the UK and overseas.

• Understand the key principles of receivables finance using a receivable purchase agreement structure including: 
• Terminology
• Assignments
• Utilisation
• Designating receivables
• Accounts and collection from debtors
• The suite of representations and warranties
• Default triggers and rights
• Recourse rights
• Operational requirements
• Key differences between loan agreements and receivables purchase agreements;
• what you need to understand commercially before you even look at a receivables finance term sheet or agreement or start negotiating it;
• understand how the underlying receivables finance agreement sits alongside other financings and financing documents;
• understand how the template receivables finance agreement you use can affect negotiation and costs (a common source of cost overruns and irrecoverable fees);
• examine how to disseminate information from term sheets into drafting;
• gain best practice ideas for collating and presenting clarification points when sharing first drafts with clients;
• consider how best to approach turning a mark-up into the ‘next draft’ and the importance of understanding the commercial structure of a receivables finance agreement in doing so;
• understand how risk is allocated in receivables finance agreements and key areas of negotiation;
• understand the impact of The Business Contract Terms (Assignment of Receivables) Regulations 2018 on receivables finance agreements;
• understand how other finance agreements may impact your drafting decisions;
• examine the use of ‘middle ground’ drafting (e.g. reasonable endeavours), when it may be appropriate to use it and how it affects risk allocation between the parties;
• examine the growing role of document automation technology in finance agreements, its pros and cons and what you must never assume when using it.

This receivables finance agreements training course is fully interactive and case law and exercises will be used to highlight particular issues and check your understanding.

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

• Receivables finance agreement concepts can be difficult to understand and adapt to quickly, which can affect the ability to draft and negotiate receivables finance agreements effectively. This course explains the key concepts so that drafting is made easier.
• The course examines many of the key pitfalls in drafting receivables finance agreements in one session that would ordinarily take months or years of experience to acquire.
• Our trainer has worked exclusively in the receivables finance space with many leading receivables financiers drafting and negotiating a wide range of UK and cross-border receivables finance agreements on transactions of up to £2 billion in value and has a unique insight into the key areas of focus in any receivables finance agreement.

This unique receivables finance agreements course is a must-know for the following lawyers:

• New to drafting, reviewing, or negotiating receivables finance agreements
• Want to gain a better understanding of the interplay between drafting, negotiation and commercial awareness on receivables finance transactions
• Want to be able to explain the mechanics and drafting impact of receivables finance agreements in plain English (a critical skill for all lawyers, particularly in an age where drafting is becoming more automated)
• Need a refresher on receivables finance agreements

This receivables finance agreements training course also allows lawyers to examine their drafting habits and provides practical and useful suggestions on how to approach drafting receivables finance agreements with confidence.

It also provides a useful foundation for any lawyer who is considering working within the structured finance or asset-based lending space where receivables are often a core underlying asset class.

Receivables financing is a key finance product and it is increasingly used today as a method of raising finance for all sizes of business. Therefore, any finance lawyer who wants to be able to advise effectively needs a strong understanding of this product set, how receivables finance agreements work and the key negotiation points.

With increased pressure on lawyers to provide greater value for money to their clients and time pressures on supervision, understanding how to draft, analyse and negotiate receivables finance agreements effectively is an essential part of every banking & finance lawyer’s toolkit.

Furthermore, the ability to translate the commercial intention of the parties into the drafting of a receivables finance agreement quickly and concisely and to advise on potential areas of risk is absolutely key to protecting a financier’s or obligor’s position.

This receivables finance agreements course will provide the essential foundations that you need to approach drafting and negotiating receivables finance agreements with confidence.