29.3.12 Bonds that are issued and sold at Financial Close should be deemed Permitted Borrowing. Variation bonds (to finance future variations to the Contract) may form part of the bond arrangements. If these are effectively committed facilities (and sold at Financial Close, thus raising actual funding) then they would be treated as any other part of the Senior Debt and should fall within the Permitted Borrowing definition. Often however variation bonds are not "committed", and are not sold at Financial Close. Instead they are issued under the main bond documentation, and thus can be sold without a new Prospectus or trust deed being required, but are held by the Issuer and therefore do not accrue interest until additional funds are needed and they are sold to the market. Listing authorities impose limitations on the amount of variation bonds that can be dealt with in this way. These uncommitted variation bonds should not be treated as Permitted Borrowings. If they are subsequently sold as part of an agreed variation, they can at such time be re-categorised as Permitted Borrowing.
29.3.13 If rescue bonds are proposed from the outset, a similar analysis would apply (but these could qualify as Additional Permitted Borrowing).
29.3.14 The definition of Original Senior Commitment (from which Additional Permitted Borrowing Limit is calculated) should only include amounts in respect of bonds which have been issued and sold.
Required drafting is as follows:
means the [amount of principal issued and outstanding in respect of the Bonds]/[gross proceeds of the issue of the Bonds] as at Financial Close, [other than the [principal issued and outstanding in respect of the Variation Bonds]/[proceeds of the issue of the Variation Bonds]];3
29.3.15 The amount referred to in limb (b) (ii) of the definition of Additional Permitted Borrowing Limit should not be indexed, even where the bonds are index-linked, and this definition should be amended as necessary.
29.3.16 These changes assume that any bonds will be issued at par (not at a discount or a premium). If an issue is not at par, financial advice should be taken as to further changes that might be needed.
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3 Proceeds of uncommitted variation bonds should be excluded. Where committed variation bonds are issued, the face value of these bonds should be included in this definition.