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Sungard Credit Agreement

Posted on 12 Apr 2021
By rb_admin

In a typical acquisition period, particularly with the participation of state-owned enterprises, the buyer and seller execute the final agreement for the weeks of acquisition, or even months, before the acquisition. After the execution, the buyer and seller strive to obtain administrative and other third-party approvals that may be required to complete the acquisition, respond to an offer if necessary, conclude the remaining due diligence, finalize financing documents and take other necessary steps. From the lenders` perspective, there are different ways to get some protection against such contingencies. For example, the letter of commitment could include a separate MAC condition with respect to the strategic buyer`s activities. The letter of commitment could also establish a MAC condition based on the combined results of the strategic buyer and seller, regardless of whether such a combined business will not exist until after closing. Such a combined MAC condition of the business would, at least in theory, allow that a substantial adverse change in the strategic buyer`s activity would be offset by the strength of the seller`s activity. However, since the sales contract does not contain a condition comparable to the conclusion, the inclusion of such a Mac condition in the letter of commitment would result in a separation in conditionality between the two documents. Both the buyer and the seller would probably vigorously oppose such contradictory constraints. While obtaining credit ratings may be necessary to allow lenders to syndicate their loans, obtaining credit ratings is not a standard financing condition in a letter of commitment.

In general, buyers and sellers will withstand any closing condition that requires the confidence of a third party whose actions and timing cannot be controlled, such as an agency. B credit rating. Note that if you have credit ratings, z.B. for financing in the lower middle classes, the ratings do not usually come in the form of a given credit score. In other words, they are only procedural and not material, because obtaining a given rating would be a substantive criterion similar to a certain financial ratio. Signing an acquisition agreement often leads the seller not to pursue other potential buyers for a period of time, while the parties try to finalize the items mentioned in the previous sentence. For example, acquisition agreements contain routine agreements that prohibit the seller from soliciting or facilitating other offers and require the parties to carefully agree with the conclusion. In addition, many acquisition agreements do not give the purchaser the right to terminate the contract in the event of a default (called a “financing provision”), i.e. require the purchaser to impose a significant penalty if the transaction does not continue, particularly because of the failure of the financing (“reverse-break-up”).

Accordingly, when the acquisition contract is signed and in return for the buyer`s efforts and costs to complete the acquisition, the purchaser will want the lenders to have strong contractual obligations to finance the credits necessary to complete the acquisition.