Material adverse effect/material adverse change meaning

The concepts of material adverse change (MAC) and material adverse effect (MAE) are deployed in distinct yet connected ways in a standard facility agreement. Material adverse effect Facility agreements typically include a defined term for material adverse effect. Its primary function is to qualify specified representations, undertakings and events of default. Material adverse change A material adverse change in the borrower’s circumstances is often treated as a separate event of default. This provision is routinely the subject of heavy negotiation, with variations in scope. A common formulation links the MAC event of default back to the MAE definition. The borrower is also required to represent—sometimes on a repeating basis—that no material adverse change has occurred to its business or financial condition since the date of the most recent financial statements delivered to the lender. The drafting of the material adverse effect definition determines both the reach of the qualifications applied to the relevant representations, undertakings and events of default, and what will constitute the MAC...

This glossary sets out numerous expressions frequently encountered in the restructuring arena. Words appearing in the definitions in bold are explained in other entries in this glossary. For further banking terminology, see the principal Banking & Finance Glossary. Restructuring glossary—A Acceleration: Acceleration means the agent, acting on directions from the majority lenders after an event of default, takes formal action, for example calling for early repayment of the facility. Ad-hoc committee: A temporary creditors’ group (often contrasted with a formal committee) that lacks any entitlement to official recognition. Administration: A process under the IA 1986 in which a financially distressed company is operated by an administrator as a going concern before longer-term outcomes, such as break-up and sale, are pursued. Administrator: An Insolvency Practitioner named by the court, a Qualifying floating charge holder, the directors or the company, to take control and fulfil one of the purposes in IA 1986, Sch B1. Administrative receivership: Arises when a company breaches the terms of...

This glossary sets out many of the expressions commonly used in the leveraged finance market. Words appearing in the definitions in bold are defined elsewhere in this glossary. For further banking terminology, please refer to the main Banking & Finance Glossary... Acquisition finance glossary—A Acceleration Acceleration is the formal action taken by the agent, on the instructions of the majority lenders, following an event of default, such as making a demand for early repayment of the loan. See Practice Note: Accelerating a loan for more information... Accordion feature/accordion facility An accordion, also called an incremental debt feature, is a mechanism in the facilities agreement that, provided specified conditions are satisfied (for example, pro forma compliance with a leverage test), permits those lenders under the facilities agreement who wish to do so to advance additional debt. The terms for that extra debt are typically captured in an increase notice. This accordion or incremental debt flexibility is different from structural adjustment, which usually requires the majority consent...

Insert the following as a new definition (if not already included) in the definitions and interpretation clause of the share purchase agreement: 1 Definitions and interpretation Warranties means the warranties [ and representations ] set out in Schedule [ insert number ], and Warranty denotes any one of them; 1 Termination of this Agreement by the Buyer 1.1 In addition to any entitlement of the Buyer to recover damages for a breach of Warranty, the Buyer may terminate or rescind this Agreement (as applicable) at any time with immediate effect by written notice to the Seller if, between the date of this Agreement and Completion: 1.1.1 the Seller is in breach of clauses [ insert number ] to (and including) [ insert number ]; 1.1.2 [ the Seller is in [ material ] breach of any of the Warranties or would be in [ material ] breach of the Warranties if the Warranties were repeated at Completion, or...