Evaluation Of A Syndicated Loan

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Introduction A syndicated loan is where a group of banks lend money to the borrower on a single loan agreement, each of these banks lend to the borrower in accordance to the agreement. When a syndicated loan agreement is negotiated, borrower agrees, on a limitation clause which may, terminate the credit facility if there is any deterioration in the position of the borrower, which is material to the lender and the agreement. This clause maybe called as the Material Adverse Change or Material Adverse Event Clauses. The main use of these clauses is to protect the interest of the lender at different stages of the agreement from making an unprofitable and loss making deal. Material Adverse Change Clause and Material Adverse Event Clause Material Adverse Change Clause and Material Adverse Event Clause have been used interchangeably and correspondingly to each other, as quoted “… the material adverse change (MAC) clause and its equivalent, the material adverse event (MAE) clause.” It is common practice in the agreements and is seen in the works of authors, that there has been no distinction made in material adverse change and material adverse event, both being dealt under a common title as the “MAC clause” Howsoever, it is important to understand the basic meaning of both change and event. Change is “An act or process through which something becomes different” . Change in the agreement, is a deterioration of the position of the borrower from when the agreement was first made. For

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