Existing and new financing arrangements

Existing finance arrangements
With regard to existing finance arrangements, your credit provider may sometimes try to claim early repayment of the financing, or to tighten the applicable conditions. It is recommended to go over your existing credit documentation for various aspects, such as:
 

• included financial ratios which (if not met) may lead to notice of termination or termination of the credit facility by the bank, so that you can (pro) actively keep a close eye on it;
• the possibility for the bank to charge or pass on to the borrower(s) a higher interest rate the moment its own funding costs are higher than the basic interest provided by the credit
• documentation, preventing possible surprises at a later stage;
• the possibility for the bank of requesting additional security based on positive pledge provisions possibly included in the credit documentation, so as to be prepared for possible requests to that effect;
• the consequences for the rest of the group if a group of companies has obtained a credit facility under joint and several liability, and one of these companies experiences financial difficulties;
• the existence of letters of comfort or capital maintenance declarations, which in some cases could be dangerous.

New financing arrangements
Banks and other financiers are cautious to provide and arrange re-financing arrangements and/or new finance arrangements. Start preparing a refinancing or a renewal on time. In this context, it is recommended to:
 

• go over the existing credit documentation in order to establish possible maturity dates of the specific facilities, allowing you to start preparing and negotiating for a renewal or refinancing in a timely manner;
• in case a mandate is provided to a bank to arrange a new finance arrangement or a refinancing arrangement, to give extra attention to the conditions on which the bank accepts this mandate. It is especially the wording of a possible 'material adverse change' clause that should be given adequate attention;
• if the new credit documentation for a syndicated finance arrangement is finally negotiated, to give extra attention to stipulating provisions in case the lender no longer meets its obligations under the credit documentation;
• analyze the possibilities to restructure a group which the company is part of;
• analyze the possibilities to provide security to future financiers.