Bank Loan Commitments Swing Loans And Letter Of Credit Monetary Terms - Corporate Bonds and Credit Agreement

Swing Loans

FMC Credit Agreement, Section 2.03, 2.07(c) and (e), 2.10, 2.11(a)-(c), 3.03(a)

Problem Set # 2B

1. Who can borrow under the swing loan facility?

• A Swing Loan Borrower

• 1.01 "Swing Loan Borrower" means each of the U.S. Borrower, FMC Finance B.V., FMC Foret, S.A. and any Foreign Subsidiary

  • (i) designated a "Swing Loan Borrower" for purposes of this Agreement by the U.S. Borrower in a written notice in substantially the form of Exhibit D-2 hereto (each, a "Swing Loan Borrower Designation" and each Swing Loan Borrower designated thereby, a "Designated Borrower"),

  • (ii) accepted as same by the Administrative Agent and the Swing Loan Lender and

  • (iii) joining this Agreement and the other Loan Documents pursuant to documentation satisfactory to the Administrative Agent and the Sing Loan Lender.

2. How does Borrower obtain funds under the swing loan facility?

• Kahan: S. 3.03, by notice to Swing Loan Lender

• 3.03 Making the Swing Loans. Etc. (a)

  • “In order to request a Swing Loan, a Swing Loan Borrower shall telecopy (or forward by electronic mail or similar means) to the Swing Loan Lender a duly completed request in substantially the form of Exhibit E (Form of Swing Loan Request), setting forth the requested amount, currency and date of such Swing Loan (a "Swing Loan Request"), to be received by the Swing Loan Lender not later than 12:00 p.m. (London time) on the day of the proposed borrowing.

  • Subject to the terms of this Agreement, the Swing Loan Lender agrees to make, on the date of the relevant Swing Loan Request, a Swing Loan available to the Swing Loan Borrower specified in such Swing Loan Request.

  • The Swing Loan Lender shall not be required to determine that, or take notice whether, the conditions precedent set forth in Section 4.02 have been satisfied in connection with the making of any Swing Loan.”

• Borrower telecopy to the Swing Loan Lender a request (Exhibit E’s form) before 12pm on the day of proposed borrowing on the day of request, Lender make a Swing Loan available to the Borrower – lender not required to determine whether 4.02 conditions precedents are satisfied

3. In what currencies can a Borrower obtain a swing loan?

• In any Alternate Currency (not US Dollar) (s.2.03), which means any other lawful currency which is freely transferable into Dollars (s.1.01)

  • 2.03 The Swing Loans. “Such Swing Loans shall be denominated in any Alternate Currency (to the extent acceptable to each Swing Loan Lender”

  • 1.01 "Alternate Currency" means any lawful currency other than Dollars which is freely transferable into Dollars.

4. In what amounts can a Borrower obtain a swing loan?

• No minimum or minimal increments. Not above Swing Loans Commitments

• 2.03 “Such Swing Loans shall be… in an aggregate principal amount as to all Borrowers not to exceed at any time outstanding the lesser of the Dollar Equivalent of

  • (i) the Swing Loan Commitments and

  • (ii) the then Unused Commitments of Lenders having Termination Dates falling on or after the proposed maturity date of such Swing Loan.”

Summary

• 3.03 Swing Loan

  • Notice by 12pm get it on the same day

  • Swing rate: Euros and other currencies, same day notice non-dollar loan in a short time

  • Sublimit: $50M

  • Notice is made to swing loan lender (not through admin agent (Citibank): nothing to administer - money is provided by swing loan lender, need not notify a group of lenders)

• 3.01 Revolving Loan

  • Base rate – notice on the same day 11am; Eurocurrency rate – 3 business days before

  • Base rate: only in dollars, min amount of 1M

  • Eurocurrency rate: min term of 1 month, Dollars or Euros, 3 days’ notice, no min amount

  • Notice to admin agent

• Content of Notice: amount, date, currency

5. What is the interest rate on Swing Loans?

• 2.08 (a)(ii) Swing Loans. “If such Loan is a Swing Loan (other than an Overdraft Advance, for which the rate shall be equal to the Overdraft Advance Interest Rate), a rate per annum equal at all times to the Swing Loan Base Rate plus the Applicable Margin (applicable to Eurocurrency Rate Loans) minus the Applicable Percentage (applicable to Eurocurrency Rate Loans) in effect from time to time…”

• "Swing Loan Base Rate" means, for any amount in an Alternate Currency, for any day the rate of interest per annum equal to the higher of

  • (i) the rate of interest per annum at which overnight deposits in the Alternate Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by the Swing Loan Lender's local branch to major banks in the local market or other applicable offshore interbank market, and

  • (ii) the cost of funds to the Swing Loan Lender's local branch with respect to such amount for such day, expressed as a rate of interest per annum.

• Annual rate: Swing Loan Base Rate + Applicable Margin - Applicable Percentage

• Higher of:

  • amount equal to the interest rate offered for overnight deposit by the Swing Loan Lender's local branch to major banks in the local market/ other applicable offshore interbank market; and

  • cost of funds to lender’s local branch for that amount

• Payable when?

  • 360-day year – 2.11(c)

  • “all computations of interest based on the Eurocurrency Rate, the Swing Loan Rate or the Base Rate based on the Federal Funds Rate shall be made by the Administrative Agent on the basis of a year of 360 days… in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable.”

• Prepayment

  • 2.10(b)

  • 2.07(e)(ii) – is SLC per Lender or aggregate

How does the rate compare to the rate on Eurocurrency Rate Loans?

• 2.08(a)(iii) Eurocurrency Rate Loans. “If such Loan is a Eurocurrency Rate Loan, a rate per annum equal at all times during each Interest Period for such Loan to the sum of the Eurocurrency Rate for such Interest Period plus the Applicable Margin minus the Applicable Percentage, payable on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, at three-month intervals following the first day of such Interest Period.”

6. When and why do Swing Loans have to be repaid?

• Kahan: Upon any Revolving Loan Borrowing (2.03), but also by maturity date specified in request which shall be no more than 10 business days are borrowing (2.07(c)). Note that Sections 2.11(a) and 2.07(c)) have conflicting provisions on repayment currency

• 2.03 Swing Loans

  • “… Each Swing Loan must be paid in full upon any Revolving Loan Borrowing by a Swing Loan Borrower hereunder and shall in any event mature no later than the Termination Date… amounts of Swing Loans repaid may be reborrowed…”

• 2.07 Repayment (c) Swing Loans.

  • “Each Swing Loan Borrower shall repay to the Administrative Agent… on the earlier of

    • (i) the maturity date specified in the applicable Swing Loan Request (which maturity shall be no later than the tenth Business Day after the requested date of such Borrowing) and

    • (ii) the Termination Date of the Swing Loan Lender”

• 3.03 Swing Loan Request – telecopy form setting forth requested amount, date, currency

  • [should also mention maturity date, as required in 2.07]

• Prof: Repayment obligation addressed in different ways in 2.03 and 2.07

  • 2.07 is on repayment, but it mention for the first time that the Swing loan Request should contain maturity date, while 3.03 did not mention the requirement to state maturity date

  • Notice requirement: should specify the maturity date

  • Substantive requirements: maturity date has to be within 2 weeks

• Should make cross references (e.g. “repayment in accordance to 2.07”); repeat it in both sections; or put everything in the same section; or (worst) to have contradicting terms

In what currency are Swing Loans repaid?

• s. 2.11(a) Swing Loan should be repaid in the currency of the borrowing (not dollars)

• Though s. 2.07(c) “Each Swing Loan Borrower shall repay to the Administrative Agent for the account of the Swing Loan Lender, the Dollar Equivalent of the outstanding principal amount of each Swing Loan” Dollar Equivalent = “amount of Dollars that would be required to purchase such amount of such Alternate Currency”

• How do you resolve contradiction? [0:30]

• 2.08(a)(ii) Interest – Swing Loan “a rate per annum equal at all times to the Swing Loan Base Rate plus the Applicable Margin (applicable to Eurocurrency Rate Loans) minus the Applicable Percentage (applicable to Eurocurrency Rate Loans)”

  • Swing Loan Base Rate + Applicable Margin – Applicable Percentage

    • Applicable Percentage: definition only has one percentage that applicable to everything (there is no percentage that is only applicable to Eurocurrency Rate Loans)

    • Swing Loan Base Rate: local interest rate

      • Not consistent to the conceiving of Swing Loan made in foreign currency, but immediately when loan is made, treated as US Dollar Loans (should charge US Dollar interest)

      • 1.01 Swing Loan Base Rate means “any day the rate of interest per annum equal to the higher of (i) the rate of interest per annum at which overnight deposits in the Alternate Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by the Swing Loan Lender's local branch to major banks in the local market or other applicable offshore interbank market, and (ii) the cost of funds to the Swing Loan Lender's local branch with respect to such amount for such day, expressed as a rate of interest per annum.”

      • Inters rate for a Swiss Franc loan look at the local market rate of that currency (local...