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Term Sheet Checklist for Unsecured Debt Transactions

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Term Sheet Checklist for Unsecured Debt Transactions

    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

    PART I - STRUCTURE

    1. Basic Note Terms (Per Series)

    ________ Currency

    ________ Principal Amount

    ________ Purchase Price

    ________ Interest Rate

    ________ Interest Paid

    ________ Semiannually

    ________ Quarterly

    ________ Monthly

    ________ Interest Calculation

    ________ 30/360

    ________ Actual/360

    ________ Actual/365

    ________ Yield/Spread

    ________ Term

    ________ Average Life

    ________ Scheduled Prepayments

    ________ Dates

    ________ Amounts

    ________ Optional Prepayments

    ________ par

    ________ make whole premium

    ________ at Treasuries plus ___ b.p.

    ________ based on _____ H15 ______ Telerate

    ________ Bloomberg _______ Other

    ________ at fixed, declining percentage

    ________ applied against mandatory prepayments

    _________ in inverse order of maturity

    _________ pro rata

    ________ Timing of optional prepayments

    ________ from time to time

    ________ after _____ date

    ________ on interest payment date ________ Other Prepayments

    ________ Change of Control

    ____ par

    ____ premium

    ________ Sale of Assets

    ____ par

    ____ premium

    ________ Other

    ________ Minimum Denominations ________ Fees/Other Return

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    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

________ Currency/interest rate swap (Issuer/Noteholder)

    2. Issuer/Guarantor

    ________ Issuer(s)

    ________ Co-obligor

    ________ Domestic 1________ Foreign

    ________ Guarantor

    ________ Parent (Downstream guaranty)

    ________ Domestic

    ________ Foreign

    ________ Subsidiary (Upstream guaranty)

    ________ Domestic 2________ Foreign

    ________ Sister Company (Cross-stream guaranty)

    ________ Domestic

    ________ Foreign

    ________ Holding Company

    ________ Operating Company

    3. Use of Proceeds

    ________ Issuer(s)

    ________ Repayment of debt

    ________ General corporate uses

    ________ Acquisition

    ________ Other 3________ Guarantors

    ________ Repayment of debt

    ________ General corporate uses

    ________ Acquisition

    ________ Other

    4. Senior/Subordinated

    Senior

________ Senior but not pari passu with other outstanding senior debt

    ________ Pari passu with other outstanding debt

    ________ Other senior outstanding debt 4________ Revolver

    ________ Term 5________ Guaranties of other senior outstanding debt

    ________ Parent - Downstream

    ________ Domestic

    ________ Foreign

    ________ Subsidiary - Upstream

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    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

    ________ Domestic

    ________ Foreign

    ________ Sister Company - Cross-stream

    ________ Domestic

    ________ Foreign

    ________ Priority Debt Covenant

    ________ Subsidiary Guarantor Unsecured Debt Included 6________ Subsidiary Guarantor Unsecured Debt Excluded 7Subordinated 8_______ Definition of Senior Debt

_____ Liabilities for money borrowed

    _____ Conditional Sales/Title Retention Agreements and similar

    arrangements

    _____ Capitalized Leases

    _____ Assets of borrower encumbered for the benefit of third parties

    _____ Guaranty Agreements

    _____ Credit Support Agreements and similar "keep well" types of

    arrangements

    _____ Derivatives such as interest rate swaps, etc. _____ Trade Credit

     9_______ What claims can be included in Senior Debt?

    _____ Principal and interest or other primary obligation _____ Prepayment premiums

    _____ Default rate of interest

    _____ Other fees and charges

    _____ Costs of collection

    _____ Bankruptcy post-petition interest

    _____ Total amount capped or principal amount capped

    _______ Amendments, Extensions and Refinancing of Senior Debt

_____ Funded Debt vs. other obligations

    _____ Funded Debt

    _____ Principal

    _____ Interest

    _____ Fees, premiums and other charges

    _____ Terms & conditions

    _____ Maturity & average life

    _____ Notice to holders of subordinated debt

    _____ Consent by holders of subordinated debt required?

    _______ Amendments, Extensions and Refinancing of Subordinated Debt

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    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

    10_____ Controls by Senior Debt

    _____ Controls between multiple levels of Subordinated Debt _______ Events of Default for Subordinated Debt

     11_____ What events?

    _____ Required number of holders or amount

    _____ Cross default or cross acceleration to Senior Debt

    _____ Grace period(s)

    _____ Cure rights for issuer & senior debt

    _____ Notice requirements to parties other than the issuer?

_______ Payment Blockages

    _____ For monetary defaults - number, length of time, etc.

    _____ For non-monetary defaults - number, length of time, etc.

    _____ Materiality standards for each

________ Other Provisions

    _____ Limitation on remedies such as standstill periods

    _____ Special provisions that apply in an Issuer's bankruptcy

    _____ Poison puts or other special rights triggered by major events such

    as mergers, tender offers or exchange offers?

    _____ Are there provisions for multiple levels of subordination? If so,

    check for circularity problems

    5. Event Risk Protection

    ________ Change in ownership

    ________ Percent required for change

    ________ Key owners change

________ Change in management

________ Prepayment/Default/Rate Increase

    ________ Prepayment price

    ________ Make whole premium

    ________ Adjusted make whole premium 12 ________ Event of Default

________ Other

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    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

    PART II - COVENANTS

    Limitations on

    ________ Change in Control (FCRM, Chap. 1)

    ________ Debt (FCRM, Chap. 4)

    ________ Distributions (FCRM, Chap. 10)

    ________ Investments (FCRM, Chap. 10)

    ________ Liens (FCRM, Chap. 6)

    ________ Lines of Business (FCRM, Chap. 7)

    ________ Long Term Leases (FCRM, Chap. 5)

    ________ Mergers, Consolidations (FCRM, Chap. 8)

    ________ Repurchase of Notes (Model Forms, Sec. 8.5)

    ________ Sale-and-Leasebacks (FCRM, Chap. 11)

    ________ Sale of Assets (FCRM, Chap. 8)

    ________ Solicitation of Noteholders (Model Forms, Sec. 17.2)

    ________ Tax Consolidation (FCRM, Chap. 12)

    ________ Transactions with Affiliates (Model Forms, Sec. 10.1)

    Maintenance of

    ________ Properties (Model Forms, Sec. 9.3)

    ________ Insurance (Model Forms, Sec. 9.2)

    ________ Corporate Existence (Model Forms, Sec. 9.5)

    ________ Net Worth (FCRM, Chap. 9)

    ________ Working Capital (FCRM, Chap. 3)

    ________ Income/Cash Flow to Interest Expense (FCRM, Chap. 2)

    ________ Income/Cash Flow to Fixed Charges (FCRM, Chap. 2)

    ________ Income/Cash Flow to Debt Service (FCRM, Chap. 2)

    ________ Other financial ratios

    Other

    ________ Compliance with Laws Generally (Model Forms, Sec. 9.1)

    ________ Compliance with Environmental Laws

    ________ Compliance with ERISA

    ________ Payment of Taxes and Claims (Model Forms, Sec. 9.4)

    General Considerations 13________ Subsidiaries: Consolidated or Restricted? 14________ Covenant Compliance: Maintenance or Incurrence? 15________ Parameter Measurement: Continuous or Periodic? 16________ Modifying GAAP terminology 17________ Accumulated income: ignore losses? 18 ________ Valuations: book; fair market?

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    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

    Definitions Used in Financial Covenants

    ________ Affiliate (FCRM, definition Z.01)

    ________ Cash Flow (FCRM, definition Z.23) ________ Change in Control (FCRM, Chap. 1) ________ Consolidated

    ________ Current Debt (FCRM, definition Z.27) ________ Debt/Indebtedness (FCRM, definitions Z.29, Z.45) ________ Fixed Charges (FCRM, definition Z.40) ________ Funded Debt (FCRM, definition Z.42) ________ GAAP (FCRM, definition Z.43)

    ________ Interest Charges (FCRM, definition Z.46) ________ Lease Rentals (FCRM, definition Z.49) ________ Make-Whole Amount (Model Forms, Sec. 8.6) ________ Net Income (FCRM, definition Z.21) ________ Net Worth (FCRM, definition Z.22) ________ Priority Debt (FCRM, definition Z.58) ________ Restricted Investments (FCRM, definition Z.63) ________ Restricted Payments (FCRM, definition Z.64) ________ Restricted Subsidiary ________ Subordinated Debt (FCRM, definition Z.70) ________ Subsidiary (FCRM, definition Z.71) ________ Swaps (FCRM, definition Z.74)

    ________ Tangible (FCRM, definitions Z.22.4 et seq.) ________ Wholly-Owned Subsidiary (FCRM, definition Z.76)

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    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

PART III - EVENTS OF DEFAULT

     19________ Payment of Interest within _____ days of due date 20________ Payment of Principal and Premium 21________ Default on Financial Covenants (usually immediate) 22________ Default on other covenants within ____ days (usually 30) 23________ Default on other Indebtedness $______________

    ________ Cross acceleration on other Indebtedness

    ________ Cross default on other Indebtedness

    ________ Cross acceleration on Covenant Default, Cross default on

    Payment Default 24________ Bankruptcy/Insolvency Defaults 25________ Final Judgment

    ________ Exceeds $_______________

    ________ Not discharged within ____ days (usually no greater than

    60) 26________ Misrepresentation

    ________ Materiality 27________ ERISA 28________ Change of Control/Management 29________ Enforceability of Guarantees or Other Collateral Documents 30________ Material Adverse Change/License, etc. Loss

PART IV - ACCELERATION; RECISSION

     31________ Acceleration of Notes

    ________ Individual Noteholder's right to accelerate its Note on

    Payment Default 32________ Requisite ___% of Noteholders to accelerate all Notes

    _________ By series or aggregate amount of Notes

    ________ Automatic acceleration of all Notes upon 33bankruptcy/insolvency of Issuer 34________ Make-whole premium on principal amount due

    ________ Recission 35________ Requisite ___% of Noteholders to rescind acceleration 36 ________ By series or aggregate amount of Notes

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    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

    PART V - INFORMATION AS TO ISSUER; FINANCIAL STATEMENTS AND

    INSPECTION RIGHTS

    1. Interim Financial Statements

     37________ Quarterly Statements

    ________ consolidated and consolidating; or

    ________ consolidated

    ________ Issuer and all subsidiaries; and/or 38________ Issuer and Restricted Subsidiaries

    ________ delivery period (U.S. usually between 45-60 days)

    ________ first three quarters or all four quarters

    ________ comparative figures for corresponding cumulative period(s)

    of prior year

    ________ Quarterly Report on Form 10Q alternative for a reporting

    company

    ________ certified by a Senior Financial Officer

    2. Annual Audited Financial Statements

________ consolidated and consolidating; or

    ________ consolidated

    ________ Issuer and all subsidiaries; and/or

    ________ Issuer and Restricted Subsidiaries

    ________ delivery period (U.S. usually between 90-120 days) ________ CPA opinion

    ________ Annual Report on Form 10-K alternative for a reporting company

    3. Other Information

________ Other Audit Reports 39________ Management Letters

    ________ Interim or special audits

    ________ SEC and Other Reports

    ________ Notice of Event of Default

    ________ delivery period (usually between 3-5 days) ________ Notice of ERISA Matters

    ________ Notice from Governmental Authority

    ________ Requested Information

    ________ Officer's Certificate

    ________ quarterly

    ________ annual

    ________ detailed covenant compliance calculations

    ________ certification of no Default or Event of Default 40________ Accountant's Certificate

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    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

    ________ annual

    ________ reviewed agreement

    ________ whether become aware of the existence of any Default or

    Event of Default

    ________ 144A Information

     414. Inspection Rights

    ________ Examine books of accounts and records and reports and make copies

    thereof

    ________ at any inspection

    ________ only if a Default or Event of Default exists ________ Visitation of corporate facilities

    ________ At the cost of the Issuer

    ________ at any inspection

    ________ only if a Default or Event of Default exists ________ Other limitations 42________ Talk to auditors

    ________ at any inspection

    ________ only if a Default or Event of Default exists

     435. Confidentiality

    ________ Part of Financial Statements and/or Inspection Rights

    ________ covers only information received on inspection

    ________ covers all information designated or defined to be

    confidential

    ________ Separate Section

    ________ covers information proprietary in nature and clearly marked

    as confidential

    ________ maintain confidentiality in accordance with Noteholder's

    practices

    ________ Information that may be disclosed

    ________ publicly available information

    ________ subsequently becomes publicly available

    ________ otherwise known to Noteholder other than through Issuer

    disclosure

    ________ Persons to whom, or situations in which, confidential information may be

    disclosed

    ________ directors, officers, employees, agents, attorneys or affiliates

    ________ financial advisors

    ________ any holder of same Note issue

    ________ federal or state regulatory agency having jurisdiction over

    Noteholder

    ________ NAIC

    ________ to comply with a subpoena or with any law or regulation

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    TERM SHEET CHECKLIST FOR UNSECURED DEBT TRANSACTIONS

    ________ potential transferee that is an Institutional Holder of a

    Issuer security that Noteholder offers to purchase

    ________ if a Default or an Event of Default exists, to extent

    necessary for protection of rights or remedies.

PART VI - REPRESENTATIONS & WARRANTIES

     44 ________ "Usual and Customary"45________ Model Form Representations 46________ Short Form Litany 47 ________ Long Form Litany - Beware!

PART VII - AMENDMENTS AND WAIVERS

     48________ Requisite ___% Noteholders

    ________ 100% Noteholder consent required for amendment or waiver of certain 49 provisions

PART VIII - TAX INDEMNITY-FOREIGN TRANSACTIONS

    ________ Tax indemnity required if Issuer/Guarantor ("Obligor") is not a U.S. 50 entity

    ________ Scope of Indemnity 51________ Current withholding tax of ___%

    ________ Taxes withheld because the Obligor has failed to take 52action to prevent withholding

    ________ A change in U.S. or foreign tax laws, resulting in the 53imposition of withholding taxes 54________ Taxes withheld due to

    ________ Noteholder's situation (e.g., Noteholder is doing

    business in the foreign country where Obligor is

    located) or

    ________ Noteholder has failed to take certain actions (e.g.,

    failure to make necessary filings with taxing

    authority)

    ________ Extent of Indemnity 55 ________ Single gross up,or 56________ Double gross up, or 57 ________ Full indemnification

     58________ Refunds and Reimbursements

    ________ Do Noteholders have an obligation to refund or reimburse

    Obligor for

    ________ Tax refunds clearly attributable to the Notes,

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