The Facility Letter is a fundamental banking document used in the United Arab Emirates when a financial institution extends credit facilities to borrowers. It is commonly used for both corporate and commercial lending transactions, serving as the primary document that outlines the terms and conditions of the facility being offered. The document must comply with UAE Federal Law No. 14 of 2018 (UAE Banking Law) and UAE Central Bank regulations, making it a crucial instrument in UAE banking operations. A Facility Letter typically includes essential information such as facility type and amount, interest rates, fees, repayment terms, security requirements, conditions precedent, and covenants. Once accepted by the borrower, it becomes a legally binding agreement, establishing the framework for the lending relationship between the parties.
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1. Addressee Details: Full legal name and address of the borrower
2. Reference Line: Facility reference number and date
3. Facility Type and Amount: Clear statement of the type of facility being offered and its amount
4. Purpose: Permitted purpose and use of the facility
5. Interest Rate and Fees: Applicable interest rates, calculation method, and all associated fees
6. Tenure and Repayment Terms: Duration of facility and detailed repayment schedule
7. Security Requirements: List of required security, guarantees, or collateral
8. Key Conditions Precedent: Conditions that must be satisfied before facility availability
9. Covenants: Financial and non-financial undertakings required from the borrower
10. Events of Default: Circumstances that would constitute default under the facility
11. Governing Law: Confirmation of UAE law governance and jurisdiction
12. Acceptance Block: Space for borrower's acknowledgment and acceptance
1. Islamic Finance Provisions: Required when the facility is Sharia-compliant, including relevant structure and principles
2. Syndication Terms: Included when the facility involves multiple lenders
3. Currency Provisions: Required for multi-currency facilities or foreign currency loans
4. Insurance Requirements: Detailed when specific insurance coverage is required for the facility
5. Security Margin Requirements: Included for facilities requiring maintenance of specific security margins
6. Special Drawdown Conditions: For facilities with multiple tranches or special drawdown requirements
7. Cross-Default Provisions: When the facility needs to be linked to other facilities or agreements
1. Schedule 1 - Facility Summary: Detailed breakdown of facility amounts, sub-limits, and pricing
2. Schedule 2 - Fee Schedule: Comprehensive list of all applicable fees and charges
3. Schedule 3 - Security Documents: List and forms of required security documentation
4. Schedule 4 - Conditions Precedent Checklist: Detailed list of required documents and conditions
5. Schedule 5 - Financial Covenants: Detailed financial ratios and reporting requirements
6. Schedule 6 - Drawdown Notice Format: Template for drawdown requests
7. Schedule 7 - Compliance Certificate: Template for periodic compliance certification
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