Exam Ready Notes for ELECTIVE Module 'BANKING & DEBT FINANCE LAW' (BDF)!
Notes for Workshop 6 of the BDF elective on the Legal Practice Course (LPC) at the University of Law.
These notes were used for the June 2023 exams, where I achieved a Distinction!
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BDF6
COMPLETION
• Most conditions precedent will be satisfied by completion
CONDITIONS • If the borrower thinks they may not be able to satisfy in time/at all, the
OUTSTANDING bank may agree to waive the conditions temporarily or permanently
ON SIGNING DATE (permanently if the borrower can never fulfil)
• Bank could also refuse to sign the agreement
CONDITIONS & • Not an event of default or a breach of the Facility Agreement (however,
COMPLETION won’t get the loan)
• Minor conditions that are likely to be fulfilled without an issue
• Must be satisfied by a set date after completion
CONDITIONS • Particularly useful in fast moving transactions (such as acquisitions)
SUBSEQUENT • Must be complied with otherwise borrower would be in default of the
Facility Agreement
• Bank will not give the borrower the monies until the borrower’s old loans have been discharged: (using Form DS1)
OPTION 1 • Bridging finance (which can be expensive)
• Bank will get an undertaking given by the borrower’s lawyers that they will
DISCHARGING immediately put the new monies towards discharging the old loans as soon
OLD LOANS as borrower has drawn down on the facility
• Old loan bank undertake to discharge security as soon as they are paid in
OPTION 2 full by the borrower
• Bank unlikely to delete or waive a condition about discharging security
because they want their security to rank highest
§ This cannot be achieved if old loans still remain secured
DS1 used to discharge the loan
MR02 used to register the security with CH
• Before the borrower can draw down on the facility, it must take the following steps:
1) Fulfil any conditions precedent (above)
2) Put in a utilisation request
BORROWER 3) Arrange for money to be lent on completion date of the transaction it is needed for
DRAWING 4) Create security and deliver it to the solicitor acting for the banks/security trustee
DOWN 5) Loan monies put to the intended purpose
6) Solicitor of security trustee dates security documentation on day of the transaction
7) DS1 and MR02 or other relevant discharge and charging forms are sent to CH
• Also consider maximum number of drawdowns, availability period, no continuing events of default and ensure repeated
representations remain true
• Bank will need to protect itself between borrower drawing down the loan and purchasing property (to subsequently grant
BANK’S the bank a charge over it):
PROTECTION
• Bank might get the borrower to undertake that:
§ They will spend the money in the way agreed (purpose clause)
§ If a deal the money is to be used for collapses, the money will be returned within a specified time
• Borrower’s solicitor undertakes that they will hold the money to the bank’s order
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