Finance Agreements in Project Finance

2 Part Course | Learn from a comprehensive guide & examination of the various financing agreements used in a typical project finance transaction

A corporate headquarters building with the Citi and BCX corporate offices in it

A one-day course presented over two-half days in a virtual class from 9:30am to 1:30pm UK time

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Download: Course Category Brochure | Course Outline

Part One

Introduction

The first session provides an overview to both project finance and to the operation of the common law of contract

The key characteristics of project financings
- Limited recourse
- Single cashflow
The importance of cashflow volatility
The inter-relationships of all of the contracts and the counterparties
Jurisdiction
- The contracts that are required to be under local law
- The standardisation of contracts

Security

The role of security in a project financing is fundamentally different to conventional corporate lending. This session identifies those differences.

Why security is not usually essential in project financings
Implications where the assets are moveable and/or the lenders wish to remove the Sponsors
Why project financings don’t go into insolvency
Rescheduling and restructuring
The correct law and jurisdiction
The importance of legal opinions
Classification of security types
A typical project financing security structure
Extractive industries – preventing tangible security with UJVs and bankruptcy remote vehicles
The role of the Security Trustee and the content of the Security Trustee Agreement
Fixed & Floating charges
A walk-through of the clauses within a mortgage debenture

Project Financing Loan Agreement – differences to conventional corporate lending agreements

For those who are familiar with conventional corporate loan agreements, this section focusses on the differences that are encountered in a typical project finance loan agreement

The loan syndication process in project financing
The Mandate Letter and the Term Sheet
The architecture of the project loan agreement
Significance of Representations and Warranties
The role of the project cashflow model
Lockup covenants – LLCR, ADSCR – purpose and calculation method
The cashflow waterfall
The role of the Accounts Bank and the Accounts Agreement
The two rules of contractual structuring in project financings
Alternative Dispute Resolution Procedures
Expert mediation
New York Convention – International Arbitration
Amortisation and when are cash sweep justified
Common terms agreements
Direct agreements and step-in rights to overcome privity of contract

Part Two

Project Financing Loan Agreement – the key clauses

These are the clauses that either represent negotiation battlefields between lender and borrower, or which represent complexities to be addressed

Majority Lenders - Snooze and lose provisions
Unanimous lender consent issues
- Super-majorities
- ‘yank-the-bank’
Prepayments and refinancing
Confidentiality – banks -vs- non-bank financial institutions
Market disruption
- Absence of benchmark rate
- Funding costs exceed benchmark
Sell-downs – novation, assignment, sub-participations
Material Adverse Change
Set-off complications
Appropriations law
Severance clause
Compliance certificates
Implications of default
Contractual cross-border enforcement issues – legal opinions
Implications of Sarbanes Oxley Act 2002, if applicable
Bond trust deeds
The pros and cons of bond financing vs loan syndication.

Intercreditor Agreements

In a minority of project financings there is a subordinated financing tier. We review the key ingredients of the Intercreditor relationship.

Relationship of senior and subordinated lenders
Cashflow blockages
Implications of default – subordinated lender rights

Guarantees – Completion & General

Common law guarantees are very technical documents, rich in technical dangers. We identify the fairly numerous circumstances where they can fail to achieve their intended effect.

The conventional completion guarantee
How its quantum should be determined
Deficiency guarantees
Some warnings about the enforceability of common law guarantees
Guarantees vs indemnities
Differences between Civil Law and Common Law guarantees
Several -vs- joint & several
On-demand -vs- shortfall guarantees
Continuing security clause
Variations clause
No competition clause
Termination or renunciation
Conclusive evidence clause
Survivorship clause
Implications of the Statute of Frauds Act

Please Note – This course is unsuitable for participants to attend either Part 1 or Part 2 only

This finance agreements course trainer offers a unique blend of experience in Law, Corporate Banking, Investment Banking, Corporate Financial Management, General Management and Workout. He has gained a worldwide reputation for the quality and depth of his training courses which have been developed and presented over 20+ years.

He trained as a lawyer at Cambridge and the Middle Temple and was called to the English bar.
5 years with an American bank (Chase), the world’s largest financier of oil & gas projects, as a corporate relationship manager in New York and London. In the 5 years in this role, he was exposed to the development of the North Sea projects and petrochemicals.
6 years: investment banking in Hong Kong and London (Wardley – the investment bank subsidiary of HSBC), primarily involved in mergers and acquisitions and corporate restructurings.
6 years: CFO of a public group with a joint head office in the United States and Australia. In this role he was engaged in some 35 acquisitions, over 20 equity raisings and a large number of complex financings, many of them structured on a limited recourse basis;
18 months: responsible for the ‘workout’ of a company in severe financial difficulties, being appointed as General Manager by KPMG.

For the past 20 years, the trainer has acted as an independent consultant and financial trainer. On the consulting side, he has been primarily involved in the financial modelling and structuring of power generation, LNG, mining, and petrochemical projects, as well as undertaking project vetting of many clients. On the training side, he conducts training courses in Financial Modelling, Loan Documentation, Project Finance and Corporate Finance, Corporate Valuation and M&A.

Finance agreement training participants will gain a practical understanding of the purpose of key clauses in each of the agreements, and the arguments on both sides of the negotiating interface.

Many other courses focus exclusively on the syndicated loan agreement or cover all of the operational as well as the financial contracts involved in a project financing. Our finance agreements in project finance training course looks across the range of contracts that specifically cover the financing – the project finance loan agreement, the accounts agreement, intercreditor agreement, guarantees and security structures and documentation.

It has heavily practical application, from a trainer who has a diverse background in each of law, lending, and as a corporate borrower.

This is a close examination of the various financing agreements used in a typical project finance transaction. In international project finance, the financing is likely to be governed by New York law (in the Western Hemisphere), or English law everywhere else.

The first half day identifies the structure and documentation of security, including the identification of the clauses in a fixed and floating charge, and their purpose. This is followed by an explanation of the differences found in project finance loan agreements, contrasted with corporate loan agreements, and the contents of the Accounts Agreement.

The second half day deals with other lending agreement clauses that need careful consideration. It also deals with Intercreditor Agreements, and various forms of guarantee – including Completion Guarantees, Deficiency Guarantees and a deep dive on Financial Guarantees (where common law differs materially from civil law)