Re: Legal Opinion on process of Modification of security documents as well as creation of new charge vacating the existing charge with RJSC against a Syndicated Loan, consequent upon incorporation of new lenders.
We refer to your letter dated March 11, 2007 on the above subject.
From perusal of your letter, it appears that Bank 1 and the other lenders are on process of Modification of security documents as well as creation of new charge vacating the existing charge with RJSC against a Syndicated Loan, consequent upon incorporation of new lenders.
In these circumstances, you have requested our legal opinion on the following queries:
1. Who will bear the risk and responsibility for creation and perfection of securities? Borrower or the Facility Agent?
2. In whose favour letter of Hypothecation (fixed and floating) along with Form XVIII to be filed with RJSC; either in favour of Facility Agent or in favour of Lenders?
3. Whether stipulation of Facility Amount beside the names of New Lenders in the NOC is preferable instead of simply mentioning the names of New Lenders?
Query 1: The responsibility for creation of the security documents or modification of the security documents shall be borne by the Borrower. In the Borrower want, they can assign the Facility Agent as their Agent to perform the same.
Query 2: The Security documents should be made in favour of the Lenders and the Facility Agent should also be made a party to the security documents as an Agent. The name of all the Lenders should be specified in Form XVIII to be filed with RJSC, or else there may be legal complication in enforcement of the security documents.
Query 3: This is not a legal issue. There is no legal restriction in the stipulation of the facility amount beside the names of New Lenders in the NOC.
If you have any further query, please do not hesitate to contact the undersigned.
For: “The Lawyers & Jurists”