RE: SYNDICATED LOAN AND SECURITY DOCUMENTATION
With reference to the above, please be informed that we have perused the comments of the legal counsel of BANK 1 on the draft loan and security documents. Except for the following comments, the others have been incorporated in the relevant drafts.
|1.||Clause 1.1Availability Period||The suggestion relates to construction of sentence not to the merit of the definition. As such the suggestion is not agreed to.However, as requested by you, the definition has been amended as follows to make provision for extension of the Availability Period:|
‘AVAILABILITY PERIOD’ means, in respect of the Term Loan Facility, 12 (twelve) months from the date of signing this Agreement unless extended by the Lenders;
Clause 1.1Closing Date The suggestion relates to construction of sentence not to the merit of the definition. As such the suggestion is not agreed to.2.Clause 1.2.1Bank 1 to decide.
Clause 3.5The matter has been taken care of under Clause 5.2.4.
Clause 4.1.13Individual lenders shall ensure that such approval and reports are obtained.
Clause 4.2(a)Under the Facility Agreement covenants have to be complied with until all liabilities of the Borrower are discharged. Compliance of some of the covenants is not even possible before disbursement.
For example, clause 10.1.3 stipulates as under:“the Borrower will use the Term Loan only for the purpose of setting up the Project as per details of the Information Memorandum. For the avoidance of doubt, amounts of drawn down under the Term Loan Facility shall not be applied towards prepayment of any Advances”
Compliance of the aforesaid covenant is not possible unless and until disbursement is made.
Therefore we are of the view that there is no necessity in seeking compliance of covenants as precondition to the disbursements subsequent to first disbursement.
Clause 5.2The words “and in compliance with the Debt/Equity Ratio” has been deleted.
Clause 6.2The clause suggested is not clear. We suggest that the clause should remain as it is.8.Clause 8.2Clause 8.1 & 8.2 has been rephrased and rearranged as follows:
Clause 8.1 No commitment fee will be payable for the first 12 (twelve) months from the date of this Agreement.
Clause 8.2 In the event the Availability Period is extended by the Lenders, the Borrower shall pay commitment fee to the Agent for the account of the Lenders, which shall be calculated on Bank Basis at the rate of 0.25% per annul calculated on any indrawn and undisbursed part of the Term Loan and payable quarterly in arrears during the extended Availability Period. The Agent shall advise the Borrower of the amount of commitment fee payable not less than 3 (three) days prior to its due date of payment. Commitment fee shall be shared amongst the Lenders on pro rata basis
Clause 8.3Accepted the suggestion with modification as follows:“The Borrower shall pay a management fee at the rate of 0.25% per annul on outstanding amount of the Facility on every anniversary of the first draw down of the Term Loan and on the Maturity Date. Management fee shall be shared amongst the Lenders on pro rata basis.”
Clause 8.4Participation fee in its nature non-refundable. However, the clause has been modified as under:“The Borrower shall pay a participating fee at 0.20% of the Facility (i.e. Tk. 32.00 crore) to the Agent for the account of the Lenders before signing of this Agreement. Participating fee shall be shared amongst the Lenders on pro rata basis.”
Clause 8.5‘Skim’ is a commonly used term in banking practice.
Clause 10.1.13This is a normal clause.13.Clause 10.1.21It is practical to ensure maintenance of Project Debt Equity Ratio at all times during the tenure of the Loan.
Clause 14.2We are of the view that insertion of the words as suggested shall not enhance the position of the lenders. The clause shall remain as it is.
Clause 14.3The issue has been dealt with in the Pari Passu Security Sharing Agreement.
Clause 16.3.5Accepted with modification as follows:“in the event of enforcement, provide the Lenders with copies of Security Documents including but not limited to submission of the originals of this Agreement, Loan Documents and Security Documents upon consultation with the Lenders.”
Clause 17.4.2There is no such clause in the Agreement.18.Clause 19.2The issue has been dealt with in the Pari Passu Security Sharing Agreement.19.
Clause 19.5.1As per schedule G, deposit of cheques is a condition precedent to disbursement. We are of the view that no further clarification is required in this regard.
SECURITY SHARING AGREEMENT
|1.||Clause 4.2||Distribution Moneys have to be applied first in paying all costs and expenses as stated in Clause 4.2(a). Otherwise in the event of insufficiency of Distribution Moneys, question will arise as to who will bear the expenses incurred for the purpose(s) stated in Clause 4.2(a).We are of the view that revision of sequence of application of Distribution Moneys may give rise to new dispute which the Bank should not venture with.|
|2.||Clause 5.3||Since there is no provision for prepayment in the Information Memorandum, the prepayment clause has been deleted from the Security Sharing Agreement.|
|3.||Clause 9.5||Bank 1 to decide.|
ESCROW ACCOUNT AGREEMENT
|1.||Clause 9.2||The clause constitutes an acknowledgement of the Borrower and Escrow Bank that all right, title and interest of the Borrower in the Escrow Account and Debt Service Reserve Account have been charged and assigned. Therefore question does not even arise to file this Agreement with RJSC and pay stamp duty for assignment.|
POWER OF ATTORNEY (MORTGAGE)
|1.||Recital C, Clause 3 & 6||Mortgage has been created pursuant to the terms of the Facility Agreement of the syndicated lenders and Loan Agreement for IPDC. Moreover the liabilities to be adjusted are not only the liabilities under the Deed of Mortgage but also the liabilities under the Facility Agreement of the syndicated lenders and Loan Agreement for IPDC.In view of the above, the suggestions are not agreed to.|
|2.||Clause 15||This clause is required in order to cover a situation when question may arise in future for perfection of legal mortgage which may require registration.|
HYPOTHECATION (FIXED CHARGE & FLOATING CHARGE)
|1.||Paragraph 1||Not required. Security interest over the assets shall be shared on pari passu basis in terms of the Pari Passu Security Sharing Agreement.|
POWER OF ATTORNEY (HYPOTHECATION)
|1.||Recital 3||Charge has been created pursuant to the terms of the Facility Agreement of the syndicated lenders and Loan Agreement for IPDC. Therefore, the suggestion is not agreed to.|
|2.||Clause 1||The words “at its absolute discretion” implicates that the attorney may sell the hypothecated assets either privately or by public auction or by private contract. Therefore we have incorporated the words “without any reference to us” only.|
|1.||Clause 1||Necessary provision has been incorporated in the Facility Agreement.|
With regard to the comment on WITNESS, please note that it is a usual practice to witness the execution of any deed/document. This practice has been developed for the purpose of ensuring proper execution of deed/document. Besides there is scope of argument that by mere witnessing the instrument the same will not turn to be a bond.
In view of the above we are of the opinion that the documents should be witnessed.
Should you have any further query please do not hesitate to revert back to us.
For: “The Lawyers & Jurists”