This Practice Note explains what undertakings, or covenants, are and the usual types of undertaking found in loan agreements providing for a commercial loan to an investment grade borrower. It also considers the common negotiating points and concerns for both borrowers and lenders.
Where appropriate, this Practice Note highlights relevant provisions in Precedent: Facility agreement (term loan): single company borrower—bilateral—with or without security or a guarantee and the Loan Market Association (LMA) investment grade multicurrency term facility agreement with/without observation shift (the LMA facility agreement) (available to LMA members on the LMA website).
The LMA's user guides (available in the Documents & Guidelines section of its website) and the Association of Corporate Treasurers (ACT) Borrower’s Guide to the LMA’s Investment Grade Agreements contain useful guidance on the undertakings in LMA investment grade documentation. Registration with ACT is necessary to access their guide.
For an introductory guide to lending, see Practice Note: Introductory guide to lending.
What are undertakings?
Undertakings, or covenants as they are sometimes called, are promises given by the borrower(s) and guarantors
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Jurisdiction(s):
United Kingdom
Key definition:
Investment definition
What does Investment mean?
An investment will typically mean any type of property or interest held within the territory of the host state. This will often extend far beyond 'obvious' property, such as real estate or shares in a local company, to (depending upon the circumstances) other interests such as rights under a contract, intellectual property rights and private loans. As with the concept of 'investor,' in the modern commercial world what does and does not qualify as investment can be a complex question. The definition of 'investment' will vary between BITs.
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