Mae In Loan Agreement

Posted on Posted in Egyéb

Projections of the total impact of COVID-19 (better known as coronavirus) on the economy remain highly uncertain and still reflect a large number of outcomes. As a result of this uncertainty, businesses with the remaining credit capacity under existing credit facilities are considering whether they are withdrawing some or all of the remaining credit capacity they hold under their credit facilities. As has been widely reported, many companies have already decided to do just that and use all or most of their available credit capacity. For some companies, these considerations were motivated by a general fear that a rush to the bank by other borrowers would lead to a liquidity crisis for lenders and could render financing unavailable if necessary. As noted above, industrial finance professionals can apply to the existing MAC acquisition case law to assess how a court might rule on an issue relating to a funding MAC. The real question is how a court determines what “material” is. Almost all of the existing jurisprudence is found in Delaware courts that apply Delaware law because Delaware is identified in most acquisition contracts as a law in force. However, it is likely that the Colorado and New York courts will follow these cases, as there are no binding precedents on the part of the courts in their own jurisdictions. The provisions of the MAC Regulation are generally specific to the borrower`s commercial/financial situation and do not (subject to exceptions) to global economic conditions or events affecting the credit market in general (see Section 4 of the provisions of the MAC in the letters of mandate and commitment with respect to the latter case). In this regard, it is essential that borrowers be aware of this review and prepare for it if lenders decide to implement this clause as part of their loan contracts. For companies in sectors already directly affected by COVID-19, including mandatory or voluntary closures or all its activities (cinemas, restaurants and retailers), these considerations also include a real and practical overlay, namely the need to counter the negative effects on cash flows they are already experiencing. These transactions already covered by COVID-19, which have not yet used available credit capabilities, are increasingly concerned that their lenders will decide not to finance a credit application by implementing significant adverse effects clauses (MAEs) in existing loan contracts. In light of the evolution of COVID-19, it may be useful for both lenders and debtors to identify certain contractual conditions and clauses that may be useful in determining the potential effects of a pandemic.