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3.7 LOAN REPAYMENT SCHEDULE

In general, this clause sets out the repayment schedule for the loan and the regularity (monthly, quarterly, half-yearly, or annually). Depending upon the specific contractual terms and the object of the loan agreement, the parties may choose between a range of mandatory repayment procedures that are illustrated in Chapter 4. Some of the most common are:

1. bullet payments;

2. interest-only repayment plans (semi-bullet);

3. balloon payments;

4. fixed repayment plans.

Repayment of the amount borrowed may be made either in advance by the borrower in one single instalment, or alternatively the borrower or the lender may request that advance payment may be made if certain prerequisites are met (e.g. a change of control of the borrower, change of the sponsors, change of the tenants, disposal of the property).

The borrower must repay the outstanding amount of the loan borrowed in full on the final maturity date together with all other amounts then due or outstanding from that borrower under the finance documents.

As stated in this example of a clause, prepayments could be mandatory or voluntary.

1. Mandatory prepayment – disposal of a property:

(a) The borrower must, on the disposal of the property, prepay the loans in full.

(b) Any prepayment under this clause must be made on the date on which the disposal becomes effective or (if earlier) the date on which the relevant proceeds are received by the borrower.

2. Voluntary prepayment and cancellation:

(a) The borrower may, by giving the lender not less than five business days' prior notice, prepay the whole or any part of the loan pro rata (provided that any prepayment in part must be in a minimum amount of ... and an integral multiple of...).

(b) The borrower may, by giving not less than five business days' prior notice to the bank, cancel the unutilized amount of the total commitments in whole or in part.

 
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