A credit agreement is concluded between the project company (borrower) and the lenders. The credit agreement regulates the relationship between lenders and borrowers. It defines the basis on which credit can be used and repaid and contains the usual provisions found in a business credit agreement. It also contains additional clauses to meet the specific requirements of the project and project documents. This practice note examines the first category of records, financial records. It explains what they are and some of the keywords in them. Generally speaking, an assignment unit is created for each project, which protects other assets held by a project sponsor from the negative effects of a project failure. As an ad hoc company, the project company does not own assets other than the project. Capital commitments from the owners of the project company are sometimes necessary to ensure that the project is financially sound or to convince lenders of the sponsors` commitment. Project financing is often more complex than alternative financing methods. Traditionally, project financing has been most used in the raw materials (mining), transport, telecommunications and energy sectors, as well as in sports and entertainment facilities.
The interconnection agreement shall lay down the provisions, including the following provisions. Tripartite documents are project financing documents, usually required by project lenders to establish a direct relationship with themselves and with the counterparties to the contract. Tripartite acts are sometimes referred to as acts of approval, direct agreements or ancillary agreements. The Shareholder`s Agreement (SHA) is an agreement between the project sponsors for the creation of a special entity for purpose (SPE) for project development, ownership and operation. This is the most fundamental structure owned by sponsors as part of a project financing transaction. The shareholders` agreement shall cover: this section shall contain the guarantees and guarantees, liabilities and default events that apply to the entity concerned. It will also contain provisions that would protect the Bank against any change in circumstances that may affect its loans. For example, Acme Coal co. imports coal. Energen Inc. provides energy to consumers.
The two companies agree to build a power plant to achieve their respective goals. Typically, the first step would be to sign a memorandum of understanding to set out the intentions of both parties. It would be followed by an agreement to create a joint venture. Financial documents – Financing documents govern the debt financing of the project, including priority debt and all related facilities (for example. B a cost overrun facility or other custody facility) Any positive promise that the lender`s facility will always prevail over the borrower`s other debts may be rejected, as this is not always under the borrower`s control. A negative assurance that the borrower will not take steps to influence the ranking of the facility may be an acceptable alternative. Project funding documents almost always contain an agreement with common conditions and should always include it. A common terms agreement is an agreement between the project lenders and the project company that defines the common terms for all project financing documents, as well as the relationship between them with definitions, conditions, order of drawdowns and voting rights for waiver declarations and amendments. Where the financing of the project includes a mezzanine financing element, the interconnection agreement shall set out the terms of subhesity and other principles to be applied between priority debt lenders and mezzanine debt issuers. . . .