1. Customised solutions for a smarter treasury
Regional partner of:

2. Refinancing your bank debt
Marieke Driessen
James Bresslaw
DACT
Treasury Fair
Noordwijk
8 November 2013

3. Introduction State of the loan markets; issues faced by corporates
Other funding sources
Capital markets
Purpose of this presentation: how to proceed with a refinancing

4. Issues faced by corporates when refinancing
Pressure on banks: regulatory capital requirements
Banks move away from capital intensive activities
Banks reduce exposure on corporates
Banks retreat to domestic markets; reduces available capacity
CLOs reaching end of revolving periods; reduces available capacity
Demand for debt increasing as maturities approach just as capacity is shrinking
Harder to find funds, takes longer to find them: need to plan ahead
“Amend and extend” may not be available due to lender majority requirements
Forward-start facilities may not be available (full renegotiation, new security…)

5. Other funding sources “Hollow tranches”
Mezzanine or junior debt to cover shortfall in senior lending
Capital markets: bonds, high yield bonds, convertible bonds
Contribution of equity

6. The players The House Bank The Syndicate / Club
Other: Works Council (OR); Group companies, shareholders
Advisors

7. Preparation Review existing loan documentation
Collect feedback from within organisation
Mandate letter
Confidentiality letter
Structuring the loan:
Identifying Obligors (borrowers, guarantors,…)
Identifying non-Obligor restricted group
Consider hiring external advisors: financial and legal
Devise strategy: bilateral, club or syndicate

8. Term sheet Guiding document Who does the drafting?
The time to raise issues
Take realistic negotiating position into account
Specific or general? Advantages and disadvantages of each

9. Documentation Precedent based or clean slate
LMA standard or bank documentation
Process

10. Various topics Libor/Euribor Material Adverse Effect Accordions
Waiver requests
Mandatory Costs
Hollow tranches
Basel III and Increased Costs

11. Libor/Euribor
Rate setting
Non-availability
Benchmarking proposal EU

12. Material Adverse Change
"Material Adverse Effect" means [in the reasonable opinion of the Majority Lenders] a material adverse effect on:
[the business, operations, property, condition (financial or otherwise) or prospects of the Group taken as a whole; or
[the ability of an Obligor to perform [its obligations under the Finance Documents]/[its payment obligations under the Finance Documents and/or its obligations under Clause ‎[•] (Financial condition)]]/[the ability of the Obligors (taken as a whole) to perform [their obligations under the Finance Documents]/[their payment obligations under the Finance Documents and/or their obligations under Clause ‎[•] (Financial condition)]]; or
the validity or enforceability of, or the effectiveness or ranking of any Security granted or purporting to be granted pursuant to any of, the Finance Documents or the rights or remedies of any Finance Party under any of the Finance Documents.]

13. Days of old – the soft MAC
Occurs in
representations and warranties
events of default
Seldom if ever invoked as EoD
Subjective v Objective

14. Accordions What is an Accordion? Who provides it?
existing or new Lenders?
pro rata or Borrower’s choice?
What amount will be provided?
What conditions will it be subject to?
cps agreed now or when requested?
fees agreed now or when requested?
Other similar structures

15. Structured waivers and amendments
Certain waiver requests are becoming less “specific” and more “generic” – e.g. to allow a staged Group restructuring that may happen in a variety of different ways
Do we give specific waivers for each stage, or a general overarching waiver?
How can this be structured?
Waiver given in stages
Each stage dependent on last stage being completed
Local law advice backed up by opinions
Conditions precedent to each stage
Retain recourse to assets at all times
Agreement amended at completion of each stage
On a staged waiver/amendment, remember changes already made ….. !

16. Mandatory Costs Are they still relevant?
Is anyone looking to charge them?
How can this be documented?

17. Hollow tranches What are they? How do they work? Why bother?
Issues to consider

18. Basel III and Increased Costs
The existing position on Increased Costs
What is CRD IV?
What effect will it have?
How should loan agreements change?
Other considerations

19. Contacts Marieke Driessen Of Counsel T +31 20 722 2308E
James Bresslaw
Partner, Amsterdam/London T E

21. simmons-simmons.com
elexica.com