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DF SGS 3 Consolidation Part 2
- Module
- Debt finance
Comprehensive exam notes on SGS 3 part 2 debt finance based on the learning outcomes and small group session activities at BPP. This part is supplemented by part 1.
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Events of DefaultI. Key clauses
23.1 Non-payment
An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place
and in the currency in which it is expressed to be payable unless:
23.1.1 its failure to pay is caused by:(a) administrative or technical error; or (b) a Disruption Event; and
23.1.2 payment is made within two thirty Business Days of its due date.
[As non payment is for technical reasons, the banks are facing no material risk and Borrower needs a realistic
time to identify and rectify the error.]
23.2 Financial Covenants [i.e undertakings]
Any requirement of Clause 21 (Financial Covenants) is not satisfied.
[Bank will never accept this to be removed
Separate to ‘other obligations/covenants’ bcs:
Difficult to remedy (difficult for borrower to return to the financial covenant ratio if they breached it
Usually no grace period for remedy of breach (immediate EoD) – cz its inappropriate cz financial
standing of borrower determines its credit-worthiness]
23.3 2 Other obligations
23.2.1 An Obligor does not comply with any provision of the Finance Documents (other than those referred
to in Clause 23.1 (Non-payment)) and clause 23.2 (Financial Covenants)).
23.32.2 No Event of Default under Clause 23.32.1 will occur if the failure to comply is capable of remedy and
is remedied within five thirty Business Days of the earlier of (A) the Agent giving notice to the Borrower and
(B) the Borrower becoming aware of the failure to comply.
[5 Business Days may not be long enough for the breach to be remedied – the grace period has to be long
enough for it to be feasible for us to make use of it!]
II. Amending clauses structure
1) Purpose of relevant clause in its original form from syndicate’s perspective
2) Effect of borrower’s proposed amendment
3) Syndicate’s position on amendment
4) Possible compromises between borrower’s and syndicate’s position
23.5 Cross-default
23.5.1 Any Financial Indebtedness of any member of the Group is not paid when due nor within any
originally applicable grace period.
[B fails to pay &any grace period expires]
23.5.2 Any Financial Indebtedness of any member of the Group is declared to be or otherwise becomes due
and payable prior to its specified maturity as a result of an event of default.
[B commits EoD & loan is accelerated/put on demand]
23.5.3 Any commitment for any Financial Indebtedness of any member of the Group is cancelled or
suspended by a creditor of any member of the Group is a result of an event of default.
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