Material adverse change (MAC) clause meaning

Ukraine conflict—impact of Russian invasion and sanctions on English law contracts—frustration, illegality, force majeure & MAC Does your agreement contain an illegality, force majeure or material adverse change (MAC) provision and, if so, has it been engaged? This turns on construction, so the orthodox approach applies—scrutinise the pertinent circumstances and the wording of the provision. What, precisely, is the operative occurrence? It might be a legal development (eg whether making payment would constitute a criminal offence) or a factual situation (routes are blocked, power is unavailable, the plant has been hit). Does that occurrence fall within the clause’s reach, expressly or by necessary implication? Many force majeure provisions enumerate events that qualify. An illegality provision may identify the system of law under which performance must have become unlawful. MAC provisions frequently do not delineate what is covered, relying instead on the plain sense of the expression. Determine whether the occurrence advanced to justify invoking the provision is captured. Where event lists appear, parties can dispute whether the occurrence relied...

LMA mandate letter Mandate letters are usually executed at the outset of a transaction and are commonly appended to an agreed term sheet. Their role is to record the terms of engagement between the borrower and the financial institutions acting as mandated lead arrangers (MLAs), bookrunners (responsible for managing the primary syndication) and, where the offer is underwritten, the underwriters. The mandate letter will typically address: the formal appointment of the financial institutions serving as MLAs, bookrunners and, where relevant, underwriters any conditions attached to the offer by those institutions to arrange, manage the syndication of and underwrite the financing (the offer), one of which will usually be the absence of any material adverse change (MAC) affecting the market, the borrower’s business or its ability to meet its obligations under the mandate and finance documents, and syndication matters, including market flex, front running and clear market provisions For more information, see Practice Note: How to draft and negotiate mandate letters...

When are mandate letters used? Mandate letters are ordinarily executed at the outset of a deal and are frequently appended to an agreed term sheet. They most commonly arise in syndicated transactions, serving to record the engagement terms between the borrower and the lenders that will front the syndication for the transaction (the Mandated Lead Arrangers, or MLAs). They also capture the agreed approach to the syndication of the debt. For further detail, see Practice Note: How to draft and negotiate mandate letters in loan transactions. The Loan Market Association (LMA) has two forms of mandate letter: both underwritten and best efforts. Members may obtain these documents via the LMA website. Under an underwritten mandate letter, the underwriters (often the same entities as the MLAs) commit to advance a specified share of the required debt which, in aggregate, is sufficient to fund the full required amount, irrespective of whether they succeed in bringing in other lenders to join the deal or not. This commitment applies even if no additional...

This Practice Note summarises notable cases and related materials concerning material adverse change clauses (MAC) in a financing context. The cases are arranged by theme and cover: interpreting a MAC clause acceleration based on a MAC clause Interpreting a MAC clause Names of parties: BM Brazil I Fundo De Investimento EM Participacoes Multistrategia v Sibanye BM Brazil (Pty) Limited [2024] EWHC 2566 (Comm) Judgment date: 10 October 2024 Case summary: Following drilling that triggered a blast, a mine slope in Brazil shifted by up to two metres, with the ground moving as a single block. The central issue was whether this amounted to a ‘material adverse effect’ under the definition in the share purchase agreement for the company owning the mine, allowing the buyer to withdraw. Butcher J concluded it was not a ‘material adverse event’ because, in the context of the acquisition, the change was not material. To reach that conclusion, he relied on expert valuation evidence...