A Sample Senior Facilities Term Sheet

This is a simplified version used for illustration purposes only

Confidential and subject to contract  

1. Senior Term Loan

Borrower: New co.

Arranger: [Bank name] (the "Arranger").

Underwriter: [Bank name]

Facility Agent: [Bank name] (in this capacity the "agent")

Syndication Agent: [Bank name]

Majority Senior Banks: Senior Banks whose commitments exceed 66²/3 percent of the total commitments.

Amounts: £ [insert amount]

Type: Senior secured term loan (the "Loan").

Final Maturity: 7 years.

Purpose: The proceeds of the Loan will be applied in or towards:

(a) purchasing the Target (the "Acquisition").

(b) Refinancing the existing indebtedness of Target; and

(c) Fees and other expenses.

Interest: LIBOR for 1,3 or 6 month periods plus the Margin plus reserve asset costs.

Default interest: 1 percent.

Margin:

Voluntary Prepayment: At any time in whole or in part (but if in part in a minimum amount of £ [insert amount] and an integral multiple of £ [insert amount] on 10 business days' notice.

Mandatory Prepayment: Prepayment of the Loan in full or in part (as the case may be) will be mandatory in the following circumstances:

(a) change of control (50 percent) or flotation or sale of substantially all of the business/assets of the group;

(b) if Financial Buyer (and its affiliates/funds) cease to hold 51 percent of the equity in Newco;

(c) from the net proceeds of disposal of assets in excess of £ [insert amount] per annum;

(d) from [50 percent] of Excess Cash Flow;

(e) from the proceeds of warranty and other claims under the agreement for the Acquisition (the "Acquisition Agreement") after deduction of any amount which a member of the Group is required to expend in replacing assets or meeting liabilities (including payment of tax) in respect of which the relevant claim was made under the Acquisition Agreement provided that such application must be made within 90 days after receipt of such proceeds;

(f) from the proceeds of insurance claims in respect of loss or damage to assets in excess of £ [insert amount] to the extent that they are not used by the Group within 90 days after receipt to either reinstate/replace assets in respect of which such monies were received, or to meet a liability in respect of which such monies were received.

Standard blocked account mechanism will operate to hold the cash pending prepayment.

Repayment: In installments in amounts to be agreed.

1. Revolving Credit Facility

Borrowers: Newco and Target.

Banks: Senior Banks

Amount: £ [insert amount]

Type: Senior secured revolving credit facility.

Final Maturity: 7 years.

Purpose: Working capital and general corporate purposes.

Availability: The Revolving Credit Facility will be available from Completion until the date one month prior to Final Maturity subject to agreed minimum drawing restrictions.

Interest: In the case of cash advances, LIBOR for 1, 3 or 6 month periods plus the Margin plus reserve asset costs.

Default Interest: 1 percent.

Margin: [insert amount] percent per annum.

Repayment: Each drawing to be repaid at the end of the interest period relating thereto and to be available for redrawing.

Cancellation: The Revolving Credit Facility may be voluntarily prepaid and cancelled in minimum amounts of £1 m (and integral multiples of £1 m) without premium or penalty subject to payment of accrued interest and breakage costs (if appropriate).

2. Provisions Common to Term and Revolver

Guarantors and Security:

(a) Newco and Target will enter into a debenture creating fixed and floating charges over all its assets;

(b) Newco and Target will guarantee all outstandings under the Facilities.

Security Agent: [Bank].

Initial Conditions Precedent: Usual for this type of transaction (to the satisfaction of the Agent), to include but not limited to:

(a) Evidence that not less than £ [insert amount] of equity/subordinated investor debt has been subscribed in full;

(b) All necessary governmental and regulatory consents obtained in relation to the Acquisition;

(c) Execution of the equity documents and related documentation;

(d) Documentary conditions precedent usual for this type of transaction, including all appropriate due-diligence reports (including accountants, legal and market reports), security documents, corporate documents, corporate approvals and all other documentation relating to the Acquisition;

(e) Legal opinions satisfactory to the Agent (acting on the instructions of the Senior Banks);

(f) Evidence that the existing facilities of the Target will be prepaid and cancelled and all security released before or simultaneous with first drawdown.

Representations: Usual for this type of transaction to include, but not limited to:

• Incorporation, status, authority etc.;
  
  
• Pari-passu ranking;
  
  
• No defaults;
  
  
• No material litigation;
  
  
• No guarantees;
  
  
• Key intellectual property;
  
  
• Accuracy and basis of preparation of accounts to be delivered;
  
  
• Contents of reports/business plan;
  
  
• Accuracy of projections;
  
  
• Environmental law compliance.

Undertakings: Usual for this type of transaction (subject to market standard exceptions) to include:

• No acquisitions other than in ordinary course of business;
  
  
• No mergers;
  
  
• Arm's-length transactions;
  
  
• Obtain all authorizations and consents;
  
  
• Transaction of banking business;
  
  
• No other borrowings;
  
  
• Restriction on capital expenditure;
  
  
• No restrictions on cash movements;
  
  
• No material change in business;
  
  
• No disposals other than in ordinary course;
  
  
• No dividend payments by Parent;
  
  
• Environmental compliance;
  
  
• No factoring;
  
  
• Comply with financial assistance;
  
  
• No finance leases;
  
  
• No guarantees;
  
  
• No speculative hedging;
  
  
• Maintain insurance;
  
  
• Maintain intellectual property;
  
  
• No joint ventures;
  
  
• No loans other than normal trade credit;
  
  
• Maintain status and authorization;
  
  
• Pari-passu ranking;
  
  
• Fund pension schemes;
  
  
• No sale and leasebacks;
  
  
• Negative pledge;
  
  
• No variations to transaction documents;
  
  
• Information and accounting requirements.
  
  
• Events of Default: Usual for this type of transaction to include:
  
  
• Non-payment;
  
  
• Breach of financial covenant, negative pledge, acquisitions, disposals or borrowings covenants;
  
  
• Breach of other covenants (14-day remedy period);
  
  
• Breach of representation or warranty;
  
  
• Invalidity or unlawfulness of Transaction Documents;
  
  
• Cross default (subject to an agreed threshold);
  
  
• Insolvency or related matters;
  
  
• Material litigation;
  
  
• Qualification of financial statements by Group auditors;
  
  
• Key individuals leaving and not replaced;
  
  
• Regulatory proceedings having a material adverse effect;
  
  
• An event arises which, in the reasonable opinion of the Majority Senior Banks, is reasonably likely to have a material adverse effect.

Financial Covenants: Usual for this type of transaction to include:

• EBITDA to Net Interest Payable;
  
  
• Net Borrowings to EBITDA;
  
  
• Cashflow to Total Debt Service; and
  
  
• Capital Expenditure Limits.

Fees:

• Arrangement, agency and underwriting fees will be payable as specified in [the mandate and fees letter];
  
  
• Commitment fees of one-half the Margin on the undrawn and uncancelled portion of the Facilities.

Illegality/Increased Costs/Capital Adequacy/Gross-Up for Taxes: Usual for these types of senior facilities.

Costs and Expenses: All costs and out-of-pocket expenses (including legal fees) incurred by the Arranger and the Agent to be for the account of Newco.

Assignments/Transfers: Senior Banks free to assign/transfer participations.

Syndication Memorandum: Newco to assist in syndication generally and in preparing an information memorandum.

Law: English.

Jurisdiction: Courts of England.

MA