An Overview to Financing Agreements in Terms of COVID-19
As measures against the COVID-19 pandemic impacts business life, the aftermath also brings with it the necessity to re-visit financing agreements by the parties.
In order to fully analyze the consequences of the pandemic, each and every agreement of a specific transaction should be analyzed, in detail. The crucial matters to assess regarding financing agreements may be summarized, briefly, as follows:
- Does the agreement contain any force majeure clause? Which occasions are defined as force majeure, and which conditions are foreseen with respect to force majeure (such as notification obligation, documentation, or measures to be taken for reduction of damage)? Is there any catch-all wording under the provision?
- Is there any market disruption provision under the agreement? What is the calculation method stipulated in the provision?
- What is the scope of the representations and warranties under the agreement? Is there any repeating representation that may cause misrepresentation due to the COVID-19?
- What are the periodic covenants and the scope of information covenants under the agreement? Would it be possible for an obligor to still fulfill its undertakings? What are the limitations for the undertakings?
- Is there a period foreseen in order to complete any outstanding information and documentation that are required as per the Regulation on Credit Transactions of Banks? Has any suspension been made in line with the decision of the Banking Regulatory and Supervisory Agency?
- What are the remedies or cure periods prescribed under the agreement?
- Is there any material adverse change provision?
- Is there any risk of foreclosure of security? What are the financial support mechanics under the agreement?
- Are there any other agreements that would be affected by the financial agreement? Is there any cross-default risk?
- Are any measures to be taken by the company that are convenient in terms of maintenance of the operations and the performance of the obligations possible?
- Is there any grace period? Is there any provision that would enable parties to suspend payment of a loan or repayment thereof?
- What are the consequences of default of an obligor or a lender? Is there any provision that enables the obligor to change the defaulting lender?
- Is there any risk of insolvency?
- What are the feasible mechanics under the agreement? What will be the most crucial points in the negotiations when a dispute arises? Which law governs the agreement?
- Does the project fall under the scope of the Circular issued by the Presidency of the Republic of Turkey dated 2 April 2020?