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Drafting Effectively - Receivables Finance Agreements

Gain a better understanding of the interplay between drafting, negotiation and commercial awareness

Drafting Effectively – Receivables Finance Agreements Training Course

A half-day course

  • Receivables finance concepts can be difficult to adapt to quickly which can affect the ability to draft and negotiate documents effectively. This course explains the key concepts that are essential to understand first so that drafting can be made easier.
  • The course examines some of the key pitfalls in drafting in one session that would ordinarily take months or years of experience to acquire.
  • Our trainer worked exclusively in receivables finance for several years drafting a wide range of receivables finance documents and has a unique insight into the key areas of focus in any receivables finance agreement.

  • the key principles of receivables finance using a receivables purchase 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 and the potential impact on how a deal will be negotiated;
  • understanding the underlying deal in the context of it sitting within any wider financings;
  • how the template agreement that is used can affect negotiation and costs (a common source of cost overruns and irrecoverable fees);
  • disseminating information from term sheets into drafting;
  • best practice for collating and presenting clarification points when sharing first drafts with clients;
  • how to approach turning a mark-up into the ‘next draft’ and the importance of understanding the commercial structure of a receivables finance agreement;
  • understanding 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 on your drafting decisions;
  • 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;
  • 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 page turn of a receivables finance agreement, but by examining key drafting principles and examining how receivables finance agreements fit together commercially, it will help you to acquire a set of core key principles that you can apply and adapt to draft and negotiate receivables finance agreements more effectively.

The key principles of receivables finance using a receivables purchase structure

  • Understanding key terminology
  • 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 purchase agreements

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

  • Why does who the parties are the matter?
  • 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, balance sheet matters – why?
  • Understanding lender/’borrower’ risk and lender/lender rise
  • Why is this all relevant to drafting?

Understanding the underlying deal in the 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 at 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 receivables finance agreement from above – why you must know these key parts to how a receivables finance agreement slots 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 bank 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 draft:
  • Differences in approach from loan facility agreements
  • Tick backs to 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 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 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?

The trainer is a highly 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 completed his formal training and qualified as a banking & finance solicitor in Leeds with the law firm, 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).

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, bridging finance, securitisations, social housing finance, higher education finance and 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.

He moved to an in-house counsel role at Barclays Bank PLC in 2010, working in their Trade & Working Capital team, 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 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, where he is 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.

Having worked both in private practice and in-house with leadership, sales, relationship, risk, compliance, legal, transaction management, operations and product teams, he understands both 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 foundations, commercial awareness and approaches to thinking which are necessary to achieve this.

The trainer has sat on the legal & technical committee for ABFA (now UK Finance) and the advisory board for the LexisPSL banking & finance module. He is also a member of the City Finance PSL network. He has contributed to 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 call for evidence on smart contracts. As a mentor, he has also worked on the law firm panel at Barclays Eagle Labs Legal Tech Hub, London and has provided help and support to a wide range of new start-up legal-tech businesses from the UK and overseas.

Receivables financing is increasingly used today as a method of raising finance for all sizes of business and as such, it is an area of growing importance for all banking and finance lawyers to understand. With increased pressure on lawyers to provide greater value for money to their clients and time pressures on supervision, understanding how to draft and interpret receivables finance agreements effectively is a key part of every banking & finance lawyer’s tool kit. It is also important to those lawyers who are involved in the review, negotiation and drafting of changes to receivables finance 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 course is primarily aimed at lawyers who are new to drafting or reviewing receivables finance 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 receivables finance agreements 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 also allow lawyers to examine their drafting habits and provide practical and useful suggestions to raise awareness of how it can be improved. It is also a useful foundation for any lawyer who is considering working within structured finance.

  • I liked the interactivity of the questions being asked and answered
  • I'd expected something more to do with technical black letter law and was pleasantly surprised when the content turned out to be far more hands on/practical. The trainer's delivery was excellent

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