Major intercreditor issues in multi tranche project financing transactions
Download
1 / 14

Major Intercreditor Issues in Multi-tranche Project Financing Transactions - PowerPoint PPT Presentation


  • 115 Views
  • Uploaded on

Major Intercreditor Issues in Multi-tranche Project Financing Transactions. John D. Taylor June 9, 2005. Indenture/Note Purchase Agreement. Capital Markets Lenders. Loan Agreement. National Development Lender. Common Agreement. Collateral Agency/ Trust Agreement. Collateral

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Major Intercreditor Issues in Multi-tranche Project Financing Transactions' - gabi


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Major intercreditor issues in multi tranche project financing transactions l.jpg

Major Intercreditor Issues inMulti-tranche Project FinancingTransactions

John D. Taylor

June 9, 2005


Sample financing structure l.jpg

Indenture/Note

Purchase

Agreement

Capital Markets

Lenders

Loan

Agreement

National

Development Lender

Common

Agreement

Collateral

Agency/

Trust

Agreement

Collateral

Agent/

Trustee

Project

Company

Borrower

Loan

Agreement

Multilateral

Financial Institution

Loan

Agreement

Lead Commercial Banks

as Agents/Underwriters

Political

Risk

Guarantee

Syndicate of

Commercial Banks

Export

Credit Agency

Security Agreements:

Cash Collateral Agreement

Pledge Agreement

Assignment Agreement

Mortgage

Sample Financing Structure


Elements of intercreditor agreement l.jpg
Elements of Intercreditor Agreement

  • Appointment of Intercreditor Agent

  • Sharing Provisions

  • Voting/Decision-making

  • Default/Remedial Action


Sharing provisions l.jpg
Sharing Provisions

  • General Rule: Pro Rata Sharing

    • Payments

    • Security

  • Some Exceptions

    • Separate Security (pledge of additional security, additional reserve account, etc.)

    • Political Risk Insurance Proceeds

    • “Preferred Creditor” Status


Voting decision making i who decides l.jpg
Voting/Decision-Making I → Who Decides?

  • Allocating Voting Power

    • Purely Proportional

    • Consensus

    • 800-pound Gorilla

  • Lender Goals

    • Efficiency

    • Minimize Hold-out Risk

    • Protect Key Interests


Voting decision making ii how are decisions made l.jpg
Voting/Decision-Making II → How Are Decisions Made?

  • Role of Agent

    • Unilateral Action: Agent as decision-maker

    • Group Action: Agent as decision-facilitator

  • Voting Mechanics


Lender decision making timeline l.jpg

TriggeringEvent/BorrowerRequest

VotingDeadline

LenderDecision

Agent

Solicitation

Consultation/Voting Period

Lender Decision-making Timeline


Required lenders l.jpg

Lender Voting Group

Unanimous Lenders

Supermajority Lenders

Majority Lenders

Single Lender (Veto Right)

Single Lender (“Interested” Lender)

Lender Voting Group

Unanimous Lenders

Supermajority Lenders

Majority Lenders

Single Lender (Veto Right)

Single Lender (“Interested” Lender)

Lender Voting Group

Unanimous Lenders

Supermajority Lenders

Majority Lenders

Single Lender (Veto Right)

Single Lender (“Interested” Lender)

Lender Voting Group

Unanimous Lenders

Supermajority Lenders

Majority Lenders

Single Lender (Veto Right)

Single Lender (“Interested” Lender)

Lender Voting Group

Unanimous Lenders

Supermajority Lenders

Majority Lenders

Single Lender (Veto Right)

Single Lender (“Interested” Lender)

Description/Comment

Fundamental matters for which each lender must consent/approve

Fundamental matters for which lenders seek a “heightened” voting threshold

A common “baseline” for decision-making relies on majority rule

Matters for which a lender requires a veto right due to its heightened sensitivity to matter

Matters that are only of interest to individual lender

Description/Comment

Fundamental matters for which each lender must consent/approve

Fundamental matters for which lenders seek a “heightened” voting threshold

A common “baseline” for decision-making relies on majority rule

Matters for which a lender requires a veto right due to its heightened sensitivity to matter

Matters that are only of interest to individual lender

Description/Comment

Fundamental matters for which each lender must consent/approve

Fundamental matters for which lenders seek a “heightened” voting threshold

A common “baseline” for decision-making relies on majority rule

Matters for which a lender requires a veto right due to its heightened sensitivity to matter

Matters that are only of interest to individual lender

Description/Comment

Fundamental matters for which each lender must consent/approve

Fundamental matters for which lenders seek a “heightened” voting threshold

A common “baseline” for decision-making relies on majority rule

Matters for which a lender requires a veto right due to its heightened sensitivity to matter

Matters that are only of interest to individual lender

Description/Comment

Fundamental matters for which each lender must consent/approve

Fundamental matters for which lenders seek a “heightened” voting threshold

A common “baseline” for decision-making relies on majority rule

Matters for which a lender requires a veto right due to its heightened sensitivity to matter

Matters that are only of interest to individual lender

Examples

Tenor/pricing of loans; release of collateral

Incurrence by Borrower of additional debt; amendments to security documents

Approval of budget; approval of insurance arrangements

Environmental matters; potentially matters identified in Credit Committee approval

Non-material changes to a lender’s facility agreement

Examples

Tenor/pricing of loans; release of collateral

Incurrence by Borrower of additional debt; amendments to security documents

Approval of budget; approval of insurance arrangements

Environmental matters; potentially matters identified in Credit Committee approval

Non-material changes to a lender’s facility agreement

Examples

Tenor/pricing of loans; release of collateral

Incurrence by Borrower of additional debt; amendments to security documents

Approval of budget; approval of insurance arrangements

Environmental matters; potentially matters identified in Credit Committee approval

Non-material changes to a lender’s facility agreement

Examples

Tenor/pricing of loans; release of collateral

Incurrence by Borrower of additional debt; amendments to security documents

Approval of budget; approval of insurance arrangements

Environmental matters; potentially matters identified in Credit Committee approval

Non-material changes to a lender’s facility agreement

Examples

Tenor/pricing of loans; release of collateral

Incurrence by Borrower of additional debt; amendments to security documents

Approval of budget; approval of insurance arrangements

Environmental matters; potentially matters identified in Credit Committee approval

Non-material changes to a lender’s facility agreement

“Required” Lenders


Default remedial action l.jpg
Default/Remedial Action

  • Goals - Requirements vs. Reality

  • Procedures - Notice of Default/Consultation Period/Waiver or Exercise of Remedial Action


Remedial action decision making l.jpg

If Necessary

Lenders agree

to waive

WAIVER

If Necessary

Lenders elect to

enforce

remedies

Remedial

Action

If Necessary

Lenders

subsequently

agree to waive

WAIVER

Remedial Action – Decision-making

Agent Notice

to Lenders/

Request for

Instruction

Default

If No Lender

Decision/

Commencement

of WAITING PERIOD

No Remedial Action

until requested by

Required Lenders –

STEP DOWN–MECHANIC


Remedial action step down l.jpg

Non-Fundamental Default

Fundamental Default

100

% of

Lenders

66⅔

51

90 Days

120 Days

30 Days

60 Days

Time

Remedial Action – “Step Down”


Swap provider issues l.jpg
Swap Provider Issues

  • Risks and Benefits of Swap Involvement

  • Nature of Swap

  • Coordination and Integration of Swaps

    • Swap Voting Rights

    • Swap Termination Rights

    • Swap Termination Payments


Equity related intercreditor issues l.jpg
Equity-related Intercreditor Issues

  • Role of Borrower

    • Borrower Interest in Intercreditor Matters

    • Spectrum of Structures

  • Sponsor Debt