Coordination Agreement Margin Loan

When considering whether to grant a margin loan to a borrower, lenders will consider how best to structure the loan facility and documentation to ensure that they can exercise their marginal appeal rights, to divest assets appropriately and/or appropriately, and/or to ensure their security. In this scenario, the first company released by the Cayman Islands (as a wholly-subscribed subsidiary) (the Cayman Topco) would have a Cayman law for an appropriate share mortgage (the Cayman shares mortgage) on the shares of the second company exempted from Cayman Islands (Caïman Ownerco and, with the Cayman Topco, the Caymans SPVs), as collateral for the loan made available to Cayman Topco. Marginal loans in developing countries can expose lenders to a number of risks, including their ability to liquidate shares provided by a borrower as collateral under the margina (collateral) loan. Even if the guarantee actions have liquidity to facilitate the implementation in a timely manner, this does not prevent other difficulties that may arise in the application of local legal security (usually a pledge) on the actions as collateral. These difficulties are generally as follows: borrowers should endeavour to provide legal advice on marginal loan documents (and, most importantly, all related custody and security documents) to ensure that they are familiar with their own obligations, the lender`s rights and the time frame in which marginal appeals must be executed, and how long the lender must wait before exercising its rights. With respect to illiquid securities, there is also a risk that the valuation received by the lender will be too low and that the guarantees will actually be acquired by the lender in accordance with the Financial Collateral Regulations (see below). During the term of the loan, it is important that borrowers regularly check their credit account: since the value of the market value at the portfolio market could change very quickly and that if the value decreases, the borrower must ensure that he will be able, if necessary, to sell the portfolio assets or repay the loan or replenish it with other assets, bearing in mind that the time in which calls to the margin must be very short (for example). B 24 hours or less). The terms of the Margin Call provisions and the valuation mechanics of the margina loan contract are the negotiating centre for these transactions. It is essential to agree on the frequency and method of evaluation.

Where the underlying portfolio is a number of investments in managed funds, the lender generally expects “haircut mechanisms,” an ability to exclude assets from the collateral pool when the fund manager imposes cash constraints in accordance with the terms of the fund`s documentation. During the term of a margin loan, the borrower must maintain an agreed hedging rate at all times – in other words, the market value of the portfolio must be a multiple of the outstanding loan (depending on the volatility of the portfolio asset market). When the coverage rate falls below the required level, a “margin call” is triggered and the borrower is required to either repay the loan or “reload” the portfolio of additional assets in order to restore the coverage rate and ensure that it is maintained. If the borrower does not meet the margin call (by “reconstituting” the security or repaying the loan), the lender may sell assets in the portfolio (as the borrower`s representative or, if the guarantee agreements are considered financial guarantee agreements in accordance with the Financial Collateral Regulations (see below) and use the proceeds of the sale to repay the amounts owed to it. The more volatile the value of portfolio assets, the shorter the time to complete marginal calls and the faster the lender will want to liquidate assets that lose value in the scenario where a borrower becomes insolvent in the event of a margin call.