Drafting Effectively - Receivables Finance Agreements

Receivables Finance Using a Receivables Purchase Structure: The Key Principles

• 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
• 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

The Commercial Background & the Philosophy of the Parties

• Why it matters who the parties are
• What 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?
• Why the balance sheet matters
• 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?
• Credit papers & term sheets: why size could matter
• Why do you need to ask questions?
• The information that could drive a coach and horses through your drafting, 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 the term sheet details?
• 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: A Commercial Perspective

• Visualising the receivables finance agreement from above – why you must know these key parts of 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 limitations 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 creditworthiness 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 Business Contract Terms (Assignment of Receivables) Regulations 2018 on Receivables Finance Agreements: The Impact

• 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?

Please be advised that this course does not constitute legal advice & should not be relied upon as such. Nor can the trainer give legal advice to participants during the sessions

Our trainer is an experienced lawyer, educator and writer. For almost 30 years and across several industries, he has written and delivered a wide range of bespoke training for individuals, businesses, professional associations and educational establishments.

He is currently a partner with the law firm Gunnercooke LLP. He completed his formal training and qualified as a banking & finance solicitor in Leeds with the law firm, Cobbetts LLP, in 2005. He moved 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 Trade & Working Capital team. Here, he advised 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 asset-based lending transactions, including hire purchase, lease finance and asset purchase finance.

From 2015 to 2023, the trainer was a professional support lawyer in the banking & finance team at Gowling WLG (UK) LLP. He was responsible for education & training, briefing notes, precedents, legal technologies and providing advice across the firm and its international offices 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.

The trainer has advised banks, alternative lenders, asset finance houses, borrowers, private equity houses, guarantors and pension trustees on a wide range of UK and cross-border banking and finance transactions. These have included:

• Syndicated investment-grade and global loans
• Leveraged finance acquisitions
• Real estate investment & development finance
• Asset and receivables finance
• Forward flow transactions
• Bridging finance
• Securitisations
• Social housing finance
• Higher education finance
• General corporate borrowing

He has also advised on restructurings and complex intercreditor arrangements and drafted and reviewed reports/certificates on title on a wide range of real estate transactions.

• 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
• Commercial considerations you need to understand before you even look at a receivables finance term sheet or agreement, or start negotiating it.
• How the underlying receivables finance agreement sits alongside other financings and financing documents.
• How the template receivables finance agreement you use can affect negotiation and costs (a common source of cost overruns and irrecoverable fees).
• How to disseminate information from term sheets into drafting.
• Best practices for collating and presenting clarification points when sharing first drafts with clients.
• 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.
• How risk is allocated in receivables finance agreements and key areas of negotiation.
• The impact of The Business Contract Terms (Assignment of Receivables) Regulations 2018 on receivables finance agreements.
• 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 interactive receivables finance agreements course is not a clause-by-clause page turn of a receivables finance agreement. 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.

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

• New to drafting, reviewing, or negotiating receivables finance agreements
• Lawyers wanting to gain a better understanding of the interplay between drafting, negotiation and commercial awareness on receivables finance transactions
• Explaining 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)
• Legal professionals needing a refresher on receivables finance agreements
• This 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 considering working in the structured finance or asset-based lending space, where receivables are often a core underlying asset class.

Receivables financing is a key financial product. It is increasingly used today as a method of raising finance for all sizes of business.

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 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.

Redcliffe Training's Drafting Effectively - Receivables Finance Agreements will provide the essential foundations that you need to approach drafting and negotiating receivables finance agreements with confidence.

Receivables finance agreements training is interactive. Case law and exercises used will highlight particular issues and check your understanding.