Not all facility obligors will be party to the agreement on the closing date.  Until the closing date, usually the only obligors are the parent and the acquiring company.  The target company and its subsidiaries become obligors and accede to the agreement at completion or within a pre-agreed period following the closing date.

To ensure the understanding and agreement with the foregoing, borrowers commonly seek certain amendments to leveraged facilities agreements for closing.  These include that, prior to the closing date or perhaps the first drawdown date:

  • The definition of “Group” expressly excludes “the Target and its Subsidiaries and the Target Assets”;
  • Required representations expressly exclude “the Target and its Subsidiaries and the Target Assets” as part of the Group;
  • Only the shares in the Company and over the Company’s rights under the acquisition documents shall be provided as security until transaction closing, with security over shares in the Target granted upon transaction closing; and
  • The sole Guarantors shall be the Parent and the Company, where members of the Target Group shall accede to the transaction documents as “Additional Guarantors” within a pre-agreed period following the closing date.

Once the transaction closes, the final terms are documented in detailed credit and security agreements and primary syndication of the financing takes place.  Subsequently, liens are perfected and collateral is attached.

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