The Loan Facility Letter is a crucial document used in German banking and finance transactions to establish and document loan arrangements. It serves as a more streamlined alternative to a full facility agreement while maintaining compliance with German regulatory requirements. Typically used for bilateral loans, smaller facilities, or where a less complex documentation structure is preferred, the Loan Facility Letter must comply with the German Civil Code (BGB) and Banking Act (KWG). It contains all essential elements required by German law, including facility terms, interest provisions, repayment obligations, and security arrangements if applicable. The document is particularly relevant for corporate lending, real estate financing, and general commercial loans where a balance between comprehensive documentation and efficiency is desired.
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1. Parties: Identification of the lender(s) and borrower(s), including registration details as required under German law
2. Date: Date of the facility letter
3. Salutation and Reference: Formal opening and reference to any prior discussions or agreements
4. Purpose: Clear statement of the purpose of the facility and intended use of funds
5. Facility Amount: The total amount of the facility being made available
6. Interest Rate: Specification of interest rate, calculation method, and payment dates
7. Availability Period: Period during which the facility can be drawn
8. Repayment Terms: Schedule of repayments, final maturity date, and prepayment provisions
9. Conditions Precedent: List of documents and conditions required before drawdown
10. Representations: Key representations by the borrower
11. Undertakings: Essential ongoing obligations of the borrower
12. Events of Default: Key events triggering default and remedies
13. Governing Law: Confirmation of German law governance
14. Acceptance: Instructions for acceptance and execution of the letter
1. Security: Required if the facility is secured - details of collateral and security documents
2. Fees: Required if there are arrangement fees, commitment fees or other charges
3. Financial Covenants: Include for corporate borrowers where financial metrics need to be maintained
4. Guarantor Provisions: Required if the facility is guaranteed by third parties
5. Multi-currency Provisions: Include if the facility can be drawn in multiple currencies
6. Tax Gross-up: Include for cross-border transactions or where tax implications are material
7. Break Costs: Include for fixed rate facilities or where early repayment may trigger costs
1. Conditions Precedent Schedule: Detailed list of required documents and conditions
2. Drawdown Notice: Form of drawdown request to be used by borrower
3. Repayment Schedule: Detailed amortization schedule if applicable
4. Fee Schedule: Breakdown of all applicable fees and charges
5. Security Details: Detailed description of security assets and perfection requirements if secured
6. Interest Calculation Examples: Examples of interest calculations for clarity
7. Compliance Certificate: Form of compliance certificate if financial covenants are included
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