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Product ID: 396882EAU
 
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Effective Credit Provisions: EBITDA, Financial Covenants and MAC Clauses, and Events of Default in Commercial Lending

OnDemand Webinar (87 minutes)

More lenders are attempting to enforce loan defaults and borrowers are fighting back, resulting in significant litigation.

This topic will provide borrowers' and lenders' counsel with a review of the use of EBITDA in loan documentation and financial covenants, and best practices for structuring covenants, events of default provisions and MAC clauses in commercial loans. Negotiating the definition of EBITDA and related financial covenants is a critical part of any finance deal and one clients are intensely focusing on. Understanding the basics of EBITDA and negotiating financial covenants is something sophisticated clients expect from counsel. Strategically crafted loan covenants and default provisions can provide flexibility to the borrower and adequate protections and remedies for the lender. For example, grace periods and the ability to cure defaults are critical to both borrowers and lenders. More lenders are attempting to enforce loan defaults and borrowers are fighting back, resulting in significant litigation. Carefully structured loan provisions can minimize disputes between the parties and reduce the risk of suit. As yield curves flatten, it seems that a recession is likely in the not distant future. Drafters should be aware of the issues that will arise from loan documents prepared at the end of a cycle, when easy credit leads to less scrutiny by the lenders.

Authors

Benjamin D. LaFrombois, Hinshaw & Culbertson LLP

Agenda

EBITDA

• Financial Covenants

• Mandatory Prepayments

• Determining Covenant Baskets

• Determining Applicable Margin

• Increasing EBITDA

Covenants and MAC Clauses

• Nonfinancial Covenants

• MAC Clauses Drafting

- MAC Clauses in Commercial Lending Setting

- MAC Clauses in Commercial Real Estate Setting

• MAC Clauses and Unanticipated Business Reversals With Discussion of Frac Sand Industry

Events of Default

• Cross-Default

• Insolvency-Related Events

• Change of Control

• Change in Business