Abstract
Loan agreements contain detailed definitions. This helps to ensure consistency between different provisions of the document; to avoid ambiguity; and to keep the complexities out of the body of the agreement.
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Notes
- 1.
Provisions which ‘operate’ or actually do something as opposed to the provisions of the definitions in the definitions clause which are merely descriptive.
- 2.
See comments on the definition of Financial Indebtedness in 1.026 for a discussion on the inclusion of derivatives in this definition.
- 3.
References in this book to the LMA Compounded/Term Rate Loan are to the LMA Multicurrency Term and Revolving Facilities Agreement incorporating Term Sofr for use in Investment Grade transactions, available to LMA members via www.lma.eu.com
- 4.
See comments on Clause 1.2 (DEFINITIONS AND INTERPRETATION: Construction) in 1.065.
- 5.
See ACT Borrower’s Guide to the LMA’s Investment Grade Agreements Part III at 1.4 for a commentary on the effect of exchange rate movements.
- 6.
See the commentary on Clause 8 (Optional Currencies) 3.013 onwards.
- 7.
This is because a ‘day’ is treated as meaning a calendar day and a period of days after an event occurs excludes the day on which the event occurred. Lester v Garland (1808) 15 Ves 248.
- 8.
See comment on Clause 4.2 (CONDITIONS OF UTILIZATION: Further Conditions Precedent) in 2.025
- 9.
See Sect. 1 of the discussion of Clause 25 (Events of Default) in 8.223.
- 10.
Clause 25.3 (EVENTS OF DEFAULT: Other obligations) subclause b states “No Event of Default will occur if the failure to remedy is capable of remedy and is remedied within … in relation to [Clause] [] Business Days … of the Agent giving notice to the Company … of the failure to comply”.
- 11.
The borrower is concerned to ensure it does not have to gross-up payments. The protection in Clause 26.3 (CHANGES TO THE LENDERS: Other conditions of assignment or transfer) at subclause (d) is important here as discussed in 9.047.
- 12.
See 0.286 for a discussion of transactions having the commercial effect of borrowing and giving security.
- 13.
See commentary on the negative pledge in 8.149.
- 14.
See commentary on para (a) of the cross default clause in 8.239.
- 15.
Commonly a different definition will be used in any financial ratios (such as ‘Borrowing’) so as to enable it to be more finely tuned and more readily measured.
- 16.
Which is not a limited recourse company excluded from the provisions of the loan agreement as discussed in 0.161.
- 17.
And what IFRS means is also different in different countries—see the comments in 1.037 on IFRS.
- 18.
It is worth noting that contractual provisions such as Margin ratchets which are triggered by changes in ratings have been the subject of numerous investigations over the years, as concerns arise over the consequences of over-reliance on corporate ratings. For example, in 2013, the Credit Ratings Agencies Regulation—EU regulation 462/2013—required public authorities which supervise certain financial institutions to ‘encourage the supervised entities to … reduce automatic reliance on ratings issued by recognised agencies’.
- 19.
Under English law, entitlement to a share in the profits is not conclusive as to the existence of a partnership—s2 Partnership Act 1890.
- 20.
This section of the Partnership Act probably applies to companies as well as to persons by virtue of Rule 12.3(2A) Insolvency Rules 1986.
- 21.
See Badeley v Consolidated Bank (1888) LR 38 Ch D 238.
- 22.
As to which see 5.023.
- 23.
This is the only circumstance in which a rate for a whole Interest Period needs to be calculated in relation to Compounded Rate Loans and is the reason for Schedule 16 (Cumulative Compounded RFR Rate).
- 24.
See discussion on scope of the agreement in 0.178.
- 25.
See commentary on Clause 21 (Representations) from 8.010 onwards.
- 26.
The case turned on the definition of ‘Subsidiary’ in the Companies Acts which, on the rather unusual facts of the case, where A did not have the majority of the voting rights, required the company in question to be a registered member of the company, which it was not.
- 27.
Clause 16 (Increased Costs).
- 28.
See 11.025.
- 29.
See 11.001.
- 30.
Meaning, in the context of the LMA Compounded/Term Rate Loan, by virtue of the definition of ‘Party’ in Clause 1.2 (DEFINITIONS AND INTERPRETATION: Construction), persons who are not assignees or transferees—see Box 1.17.
- 31.
Treitel The Law of Contract, 15th edn, 14.063–14.098.
- 32.
Treitel The Law of Contract, 15th edn, 14.102 onwards.
- 33.
If any third party is intended to have the benefit of any provision of the contract, the Act (s2) also allows that third party to prevent amendment of the contract to their detriment in certain circumstances. This right is subject to any express term of the contract to the contrary. This is the reason that Clause 1.4 (DEFINITIONS AND INTERPRETATION: Third Party Rights) optionally provides that ‘….the consent of any Person who is not a Party is not required to rescind or vary this Agreement at any time’.
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Wright, S. (2024). Interpretation. In: The International Loan Documentation Handbook. Global Financial Markets. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-38489-9_2
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