a mitigation tool to offset outgoing and incoming payments to reduce the settlement risk; this mitigant is part of FX business and derivatives stipulation as concluded in respective documentation (like ISDA, TMA etc.) and is binding for both counterparties. Its main purpose is to reduce the necessity for exchanging whole notional flows and to minimize […]

Conditions precedent – the set of various conditions that Borrower must fulfill in order to be able to utilize the lending products under loan contract. This typically includes extract from commercial register, corporate approvals, Signatures specimen, KYC underlying documents and naturally execution of security documents (mortgage of Property, pledge of receivables) Conditions subsequent – these […]

Information covenants – typical set of information that each Bank needs to obtain in order to perform update of Client rating and complete the financial assessment within the annual review. Such documents may contain audited results, consolidated figures, interim figures, presentation of Compliance certificate, confirmation from state/Tax authorities on no overdue payments General covenants – […]

a commitment of the Borrower not to create any liens/pledge over its assets in favor of other creditors, which should provide a certain risk mitigation in case of unsecured lending for all Borrowers (supposing they are Pari passu). This covenants should secure that in case of Event of Default there will be still left free […]

another regular covenant securing fair/equal treatment of all (same-ranked) creditors with respect to providing collateral resp. other benefits. Having said this, the Borrower should respect this condition with respect to all Creditors within Working-capital financing, and LT financing and/or for Senior-secured Creditors, however he may apply different approach across these levels of Creditors. This means, […]

Special Purpose vehicle/company, this term is usually used for companies that do not have regular business activities, but they were established for certain purpose like construction and renting the commercial real estate. This is in favor of their Creditors, because this helps to fully ring-fence the transaction via creating the mortgage, pledging the trade receivables […]

Earnings before Interests, Tax and Depreciation representing Operating cash flow of the company calculated based on Income statement, but not taking into account changes in Working capital (trade Receivables, Payables and Stocks). This value describes ability of the Company to generate cash directly from its operations, which is a key factor for ability of the […]

A result of annual instalments covered by generated EBITDA calculated as per EBITDA/ Annual debt instalments either backwards (for last 12 Months) or on a roll-forward method. This ratio is very often used in project financing or Real-estate finance transactions, whereas min. DSCR of 1.25x may be required by the Bank to assure that Project […]

Major ownership clause, same as MAC, also this one represents very often used condition within standardized legal documentation (like LMA for instance), which should secure that during the lifetime of the credit relationship, the parent company of the Borrower will not change. It is very crucial for “name-lending” deals, whereas the Creditor relies on the […]

A usual condition of credit contract stipulating that in case of any adverse situation the Bank may terminate the contract based on Event of Default (EoD). Such negative situation might be for instance losing the license for core-business activities that would substantially effect the possibility of Borrower to repay the loan. Another example could be […]