Project Finance Loan Agreements

• To acquaint participants with the procedures that are applied in the enforcement of contractual, rights, and how decisions relating to disputes and defaults are made;
• To identity features of the law that can operate against a lender’s efforts at protecting exposures;
• To explore the areas where the two parties will typically have opposing negotiation objectives;
• To highlight clauses in the finance agreements documentation that are commonly misunderstood by lenders;
• To compare and contrast loan agreements that pertain to corporate lending and those that pertain to project finance agreement.

Session 1 – Legal System & Enforceability

• Which law should be used for the loan documentation?
• The circumstances where the choice of law is important
• Origins of law – statute law, common law, the law of equity
• The priorities in clashes of company law, contract law, insolvency law, agency law
• Jurisdiction and enforcement issues
  • Non-exclusive jurisdiction
  • Irrevocable submission
• Intra vires
  • Company objects
  • Directors’ powers
• Consideration – workarounds if absent
• Certainty and legality
  • Severance clause
• Conditions precedent, verification certificates
• Methods of execution, powers of attorney, ostensible authority
• The organisation of a syndicated loan agreement

Session 2 - Loan Agreement – Key Clauses

• The LMA (Loan Management Account) standard form clauses (English law)
• Representations and warranties – their utility
• Prepayments and/or refinancing
  • Illegality
  • Increased costs
  • Change of control
  • Yank the bank
• Voting
  • Majority
  • Super-majorities or unanimous
  • Snooze ‘n’ lose clause
• Increased costs, broken funding periods
• Market disruption
  • Unavailability of LIBOR/EURIBOR
  • Waterfall of alternatives
  • Cost of funds
• Benefit of the agreement
  • Assignment
  • Novation
  • Funded sub-participations
  • Risk participation
• Negative pledge and pari passu
• Events of default
  • Grace periods
  • Cross-default
  • Material adverse change
• Set off when solvent, set off when insolvent

• 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, he 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 for a number of clients.  On the training side he conducts training courses in Financial Modelling, Loan Documentation, Project Finance and Corporate Finance, Corporate Valuation and M&A.

There are four systems of law that can be encountered in an international project financing. Some things have to be governed by local law, whether one likes it or not – security over immovable assets, insolvency, company law, and concession agreements. One can also add domestic project loan agreements to that list. It all changes when the financiers within a syndicate are from a multiplicity of different jurisdictions. In such cases, the financing agreement will almost certainly be governed by either New York law (North & South America and the Caribbean), or English law (Europe, Africa, the Middle East, Asia, and Australasia). There is a substantial overlap between the typical provisions of a corporate syndicated loan agreement and one that involves limited recourse (i.e. project finance). So, this course comprises 4 sessions over two half-day webinars. Those four sessions cover:

1. An understanding of how the various components of the law work, including the influences of statute law and the law of equity on the enforcement of common law and contractual rights, the issues relating to cross-border enforcement of rights, and the circumstances where the contract may be unenforceable;
2. The key clauses that are common to corporate lending as well as project finance loan agreements
3. The additional clauses and features that will be encountered in the context of project financings
4. A walk-through of a loan agreement to identify and explain all of the remaining clauses that were not covered in sessions 2 and 3