Waterfall Provision In Loan Agreement

Our parents and even our grandparents never saw this kind of price. A 15-year home loan now averages 2.84%, while a 30-year loan is. In a perhaps unsurprising judgment, Judge Flaux ruled in favour of the construction of the determination of waterfalls by the plaintiff banks. It is clear from the recitals in the preamble to the Facility Agreement that BLB`s various capacities are so clearly distinguished that the term `facility agent` means BLB as such and not BLB in any other capacity. The concept of waterfall can also be used in the world of personal finance. The idea is that a person should first pay off the most expensive debts. For example, this type of plan works best for a business that will repay more than one loan. Suppose this company has three operational loans with different interest rates. The company makes principal and interest payments on the most expensive loan and only makes interest payments on the other two.

Once the most expensive loan is repaid, the company can make all interest and principal payments for the next, more expensive loan. The process will continue until all loans are repaid. Cascading provisions can often be contentious issues for unions, especially in situations where a default has occurred and the credit transaction involves hedging agreements. This case is a salutary reminder of the importance of clearly agreeing and documenting where payments related to such hedging agreements rank before or in the event of early termination in the payment cascade. Although the English Court has moved from a literal interpretative approach to a more contextual or focused approach to contract interpretation in recent years, the parties should be aware that the starting point for construction is probably still the literal approach. To demonstrate the operation of a cascading payment system, suppose a company has taken out loans from three creditors, creditor A, creditor B and creditor C. The system is structured in such a way that creditor A is the creditor with the highest level, while creditor C is the creditor with the lowest level. The agreement for what the company owes to each of the creditors is as follows: after entering into several own hedging agreements to manage its swap, BLB attempted to assert that the „Hedging Break Costs“ in clause 9.7(a) would cover their costs and expenses for the restructuring or revision of these swap agreements in the event of early termination of the borrowers` hedging agreements. BLB also argued that after the penultimate sentence of clause 9.7, the repayment of those fees and charges would be before the principal and interest paid to the lenders under the facility agreement. The dispute concerned how BLB (as a facility agent) would be required to allocate among the parties to the financing the amounts received by borrowers or guarantors under the credit facility`s `payment cascade`.