For the debt component of the project funded by the banks/ lenders, a number of agreements are executed between the private partner and the lenders/bankers. In some cases, these agreements may also need to be submitted to the public entity.
| What are Financing Agreements? Financing Agreements are the agreements executed by the private partner on the financial assistance to be provided by the Senior Lenders by way of loans, guarantees, subscription to non-convertible debentures and other debt instruments including loan agreements, guarantees, notes, debentures, bonds and other debt instruments, security agreements, and other documents relating to the financing (including refinancing) of the TPC. |
A common set of financing agreements that need to be executed are listed below.
1. Rupee Term Loan Agreement - is an agreement to be executed between the private partner, the senior lenders, the lenders' agent and security trustee. This agreement generally provides for the commercial terms on which loans have been approved for the project. The pre-commitment conditions and pre-disbursement conditions for the release of funds specified in this agreement should have been fulfilled to achieve financial closure. It is to be noted that multiple lenders may have one or separate rupee term loan agreement with the concessionaire and security trustee.
2. Substitution Agreement - is an agreement executed between the private partner, the public entity and the lenders or lenders' agent (also known as lenders' representative). This agreement generally provides for the rights covered under the event of substitution of the private partner in favour of lenders, events which would trigger substitution, procedure of substitution etc.
3. Inter Creditor Agreement - is an agreement executed between the Lenders, Lenders' Agent and the Security Trustee. The agreement sets out the terms and conditions for sharing the proceeds of the security/monies available for distribution among these parties.
4. Lenders' Agent Agreement - is an agreement executed between the Lenders, Borrower and the Lenders' Agent. The agreement generally sets out the duties of the Lenders' Agent which is acting on behalf of the Lenders.
5. Security Trustee Agreement - is an agreement to be executed among the Concessionaire, Lenders, Lenders' Agent and the Security Trustee. The agreement specifies the activities of the Security Trustee acting as the trustee for the Lenders.
• Escrow Agreement - is an agreement to be executed between the private partner, the public entity, lenders' agent and escrow bank. This agreement generally provides for the role of the escrow bank as a trustee, the details of deposits and the withdrawals from the escrow account of the project, the obligations of escrow bank, and the opening and termination of the escrow agreement etc. The Escrow Agreement provides for the execution of a supplementary escrow agreement between the lenders' representative and the private partner for details that are not generally covered under the escrow agreement.