Welcome to the January 2020
The construction provisions contained within the interpretation section of a facilities agreement have traditionally been viewed as "boiler-plate"; those provisions in the document that are necessary for it to work mechanically, but which do not tend to be heavily negotiated. However, a trend has begun to emerge whereby the construction sections seen in leveraged facilities agreements incorporate provisions that go beyond clarifying the construction of commonly used terms and include material adjustments to the substantive provisions of those agreements.
In this edition of In the Know, we look at two ways in which the scope of the construction provisions in leveraged facilities agreements is being broadened; firstly, through attempts to embed bespoke definitions of certain commercial terms and, secondly, through including substantive commercial provisions. Given the potential ramifications of this trend for both borrowers and lenders, it is important that all parties to facilities agreements are aware of the broadening scope of the construction provisions and its potential impact on the operative provisions of these agreements.