Senior Credit Agreement With Commentary (Leveraged Transactions) SIMPSON THACHER & BARTLETT LLP

Transcription

1 Senior Credit Agreement With Commentary (Leveraged Transactions) SIMPSON THACHER & BARTLETT LLP

2 Commentary focusing on a form of credit agreement used in senior secured credit financings in the syndicated leveraged market in the United States. COPYRIGHT 2005, SIMPSON THACHER & BARTLETT LLP ALL RIGHTS RESERVED No part of this material may be copied, photocopied or duplicated in any form or by any means without Simpson Thacher & Bartlett LLP s prior written consent.

3 SENIOR CREDIT AGREEMENT WITH COMMENTARY (LEVERAGED TRANSACTION) Introduction The following commentary focuses on the provisions typically included in senior secured credit financings in the syndicated leveraged market in the United States. Although there is no uniformity of credit agreement forms among the principal lead arrangers in this market, the provisions included in such credit agreements, as well as the issues raised in the negotiation of such provisions, are often similar in content and scope. The final terms of any given credit agreement will, however, reflect both the industry in which the borrower operates as well as its specific circumstances and creditworthiness. The commentary is intended to provide a brief explanation of the purposes of the relevant provisions as well as, in many instances, a discussion of certain issues often raised during their negotiation. It is not intended to be exhaustive, and the form does not include all of the provisions that may appear in a senior credit agreement. The form of credit agreement on which this commentary focuses is designed to cover an acquisition finance transaction in which a sponsor group (typically a private equity firm or group of firms) forms a holding company to own the capital stock of the entity (which becomes the borrower) acquired in the transaction. This is a common structure for a leveraged buyout, but there can obviously be many variations, and, in circumstances where the structure of the transaction differs from that described, the form credit agreement will need to be modified appropriately. Please feel free to call any of the following partners of our firm to discuss any of these provisions or for any other advice you may require: Ian Barratt (London) Jennifer Hobbs Patrick Ryan Alan Brenner Frank Huck William Sheehan James Buresh James T. Knight Stephen Short (London) James Cross David Lieberman Brian Steinhardt David Eisenberg Justin Lungstrum Marisa Wesely Euan Gorrie (London) Alden Millard Ken Wyman Sinead O Shea (HK) New York City (212) Los Angeles (310) Palo Alto (650) Washington, D.C. (202) London Beijing Hong Kong Tokyo São Paulo

4 TABLE OF CONTENTS SECTION 1. DEFINITIONS 1 i Page 1.1 Defined Terms Other Definitional Provisions SECTION 2. AMOUNT AND TERMS OF COMMITMENTS Term Commitments Procedure for Term Loan Borrowing Repayment of Term Loans Revolving Commitments Procedure for Revolving Loan Borrowing Swingline Commitment Procedure for Swingline Borrowing; Refunding of Swingline Loans Commitment Fees, etc Termination or Reduction of Revolving Commitments Optional Prepayments Mandatory Prepayments and Commitment Reductions Conversion and Continuation Options Limitations on Eurodollar Tranches Interest Rates and Payment Dates Computation of Interest and Fees Inability to Determine Interest Rate Pro Rata Treatment and Payments Requirements of Law Taxes Indemnity Change of Lending Office Replacement of Lenders SECTION 3. LETTERS OF CREDIT L/C Commitment Procedure for Issuance of Letter of Credit Fees and Other Charges L/C Participations Reimbursement Obligation of the Borrower Obligations Absolute Letter of Credit Payments Applications... 83

5 SECTION 4. REPRESENTATIONS AND WARRANTIES Financial Condition No Change Existence; Compliance with Law Power; Authorization; Enforceable Obligations No Legal Bar Litigation No Default Ownership of Property; Liens Intellectual Property Taxes Federal Regulations Labor Matters ERISA Investment Company Act; Other Regulations Subsidiaries Use of Proceeds Environmental Matters Accuracy of Information, etc Security Documents Solvency Senior Indebtedness Regulation H Certain Documents SECTION 5. CONDITIONS PRECEDENT Conditions to Initial Extension of Credit Conditions to Each Extension of Credit SECTION 6. AFFIRMATIVE COVENANTS Financial Statements Certificates; Other Information Payment of Obligations Maintenance of Existence; Compliance Maintenance of Property; Insurance Inspection of Property; Books and Records; Discussions Notices Environmental Laws Interest Rate Protection Additional Collateral, etc ii

6 SECTION 7. NEGATIVE COVENANTS Financial Condition Covenants Indebtedness Liens Fundamental Changes Disposition of Property Restricted Payments Capital Expenditures Investments Optional Payments and Modifications of Certain Debt Instruments Transactions with Affiliates Sales and Leasebacks Swap Agreements Changes in Fiscal Periods Negative Pledge Clauses Clauses Restricting Subsidiary Distributions Lines of Business Amendments to Acquisition Documents SECTION 8. EVENTS OF DEFAULT 153 SECTION 9. THE AGENTS Appointment Delegation of Duties Exculpatory Provisions Reliance by Administrative Agent Notice of Default Non-Reliance on Agents and Other Lenders Indemnification Agent in Its Individual Capacity Successor Administrative Agent Documentation Agent and Syndication Agent SECTION 10. MISCELLANEOUS Amendments and Waivers Notices No Waiver; Cumulative Remedies Survival of Representations and Warranties Payment of Expenses and Taxes Successors and Assigns; Participations and Assignments Adjustments; Set-off iii

7 10.8 Counterparts Severability Integration Governing Law Submission To Jurisdiction; Waivers Acknowledgements Releases of Guarantees and Liens Confidentiality USA Patriot Act WAIVERS OF JURY TRIAL Delivery of Addenda iv