The Subordinate Loan Agreement is a crucial financing document used when establishing debt that ranks below senior obligations in a company's capital structure. This agreement, governed by Maltese law, is particularly relevant for financial institutions, regulated entities, and corporate borrowers seeking to strengthen their capital base or obtain additional financing while maintaining existing senior debt relationships. The document addresses key aspects such as subordination mechanisms, regulatory compliance (particularly important in the Maltese financial services sector), interest calculations, repayment restrictions, and events of default. It requires careful consideration of both the Companies Act and Banking Act requirements, especially regarding corporate borrowing powers and regulatory capital treatment. The agreement is commonly used in corporate restructuring, expansion projects, or when companies need to demonstrate a clear hierarchy of debt obligations.
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1. Parties: Identification of the Lender and Borrower, including registration details and addresses
2. Background: Context of the subordinated loan, including its purpose and relationship to other debt
3. Definitions and Interpretation: Definitions of key terms and interpretation rules, including specific subordinated debt terminology
4. The Facility: Details of the loan amount, purpose, and subordinated nature of the debt
5. Subordination Terms: Specific provisions regarding the ranking of the debt and subordination to senior creditors
6. Conditions Precedent: Prerequisites for drawdown, including regulatory approvals if required
7. Drawdown: Procedures and requirements for drawing down the loan
8. Interest: Interest rate, calculation methods, and payment terms
9. Repayment and Prepayment: Terms for repayment, including any restrictions on early repayment
10. Representations and Warranties: Standard and specific representations regarding the borrower's status and capacity
11. Covenants: Positive and negative obligations of the borrower
12. Events of Default: Circumstances constituting default, modified to reflect subordinated nature
13. Changes to Parties: Rules regarding assignment and transfer of rights
14. Notices: Communication procedures between parties
15. Calculations and Certificates: Procedures for calculations and certifications
16. Governing Law and Jurisdiction: Maltese law as governing law and jurisdiction provisions
1. Security: Include if any security is being provided, though unusual for subordinated loans
2. Tax Gross-Up and Indemnities: Include if tax gross-up provisions are required
3. Increased Costs: Include if the lender requires protection against regulatory cost increases
4. Set-off: Include if set-off rights are to be addressed (often excluded in subordinated loans)
5. Regulatory Compliance: Include if either party is regulated or if regulatory approval is required
6. Currency Provisions: Include if loan is in non-Euro currency or multiple currencies are involved
7. Guarantees: Include if third-party guarantees are part of the structure
1. Form of Drawdown Request: Standard form for requesting loan disbursement
2. Conditions Precedent Documents: List of required documents and conditions for initial drawdown
3. Repayment Schedule: If applicable, detailed schedule of repayment dates and amounts
4. Form of Compliance Certificate: Template for periodic compliance certification
5. Senior Creditors: List of senior creditors and their facilities if applicable
6. Subordination Terms: Detailed subordination mechanics and intercreditor principles
7. Form of Transfer Certificate: Template for transferring loan participation
8. Interest Calculation Examples: Examples of interest calculations under different scenarios
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