ABL credit agreements also tend to have default events that a borrower might not see in other types of credit facilities. The issue of maintaining security is key; A lender may include default events related to a large client contract or a substantial amount of cancelled orders or unsused receivables. As advice to the borrower, try to remove these provisions, as these types of events would inevitably affect the credit base. If this is not the case, the lawyer should try to negotiate the highest thresholds in order to prevent a default from breaking down. It is one thing for a lost customer to cause a decrease in the availability of the credit base, but another that this loss causes a default event under the ABL credit agreement. Once the transaction is complete, establish a compliance list for the borrower, which summarizes secularism of what the borrower can or cannot do to meet their ABL credit agreement. Include regular, event-based reporting obligations and operational negative covenants. Integrating these requirements can be a valuable tool for borrowers, as they navigate through the sometimes overwhelming number of commitments contained in ABL credit documents. In addition, the lawyer should consider keeping a common list of compliance issues raised by clients. This list would be useful for resolving recurring or recurring compliance issues before any changes or refinancings.
Since ABL organizations often contain detailed reporting obligations, a borrower should license all termination obligations to a monthly or quarterly financial report. For example, instead of requiring written notification of a new security site ten days in advance, the lawyer could revise the agreement by clarifying all new warranty sites with the monthly or quarterly financial/compliance certificate. Better yet, you add a materiality threshold to the notification requirement, so only sites with a guarantee greater than a substantial amount should be disclosed. In this way, the official responsible for completing the package of monthly reports is invited to disclose all new critical safety sites. If the lawyer structures the ABL credit agreement in this way, the borrower is less likely to forget to make the necessary termination. The same approach can be used for other communications (e.g.B. For communications regarding new bank accounts, commercial claims and intellectual property). Revolving Credit Facility – A credit agreement that allows the borrower to frequently claim and repay advances….