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3.1 OBJECT AND PURPOSE OF THE LOAN

The clause relating to the object is generally drawn up as follows.

Subject to the terms of this agreement the Lender makes available to the Borrower a medium term loan facility for the amount up to the commitment.

A structured loan sometimes specifies the intended use of the loan and consequently, in addition to the obligation to repay the loan and to pay interest, places the borrower under a further obligation to allocate the amounts received in order to fulfil a specific purpose. For example, agreements relating to the provision of credit in the construction sector will contain a clause requiring the borrower to allocate the amount to the construction of the property.

Purpose: The Loans may only be used for financing the construction cost of the properties.

3.2 CONDITIONS PRECBJENT

The effectiveness of the loan agreement could be conditional upon the lender having received, by no later than the date of execution of the contract, a set of documents in form and substance satisfactory to him.

The most common conditions precedent to effectiveness and to initial funding are the following:

Constitution: a certified true copy of the constitutional documents of the borrower entity.

Certificates: a good standing certificate of the borrower entity issued by the competent companies register, dated not earlier than a few calendar days[1] before the first funding date and including a non-insolvency statement.

Legal opinions:

• a legal opinion from an approved legal counsel to the borrower, addressed to the lender which states the borrower's due incorporation, power, and capacity to enter into the loan agreement to which the borrower is a party and the fact that the execution and performance of the loan do not conflict with the constitutional documents of the borrower;

• a legal opinion addressed to the lender in respect of each guarantor's power (if present) and capacity to enter into any guarantees.

The lender is not obliged to provide any further funding tranche until some conditions are fulfilled to his satisfaction, the most common of which are the following:

Funding Notice: the borrower has delivered a funding notice requesting the funding portion.

Commitment: the principal outstanding after providing the funding portion will not be greater than the commitment amount.

No default clause: no default or event of default has occurred or will result from the funding portion being provided.

Authorizations: all corporate authorizations which are required to be obtained by the borrower to deliver the funding notice have been obtained.

Each certified document given to the lender by the borrower must be certified to be a true copy of the original document by a director of the borrower, no more than a few days before the date on which it is provided.

Usually no funding notice may be given, if at any time the borrower has already required the provision of a certain defined funding portion (regardless of the amount of any undrawn commitment).

  • [1] A five day term is quite common.
 
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