Module 3 · Chapter 8

Representations

In clause 15 the borrower states facts that the lenders rely on. If a statement is untrue, the lenders can stop lending and, in the end, demand their money back.

≈ 12 min read 8-question test

In this chapter

  • What the borrower states in clause 15, and why the lenders ask for it
  • Which statements repeat during the loan, and which are given only once
  • What an untrue statement sets off, and how a known problem is carved out

8.1Representations in one paragraph

A representation is a statement of fact that one party makes so that the other will act. In clause 15, each Obligor (Atlas and its two guarantors) makes ten of them to the lenders. A seller under a share purchase agreement (SPA) gives warranties for the same reason: it knows the facts and the buyer does not.

The difference is what happens when a statement is wrong. A broken warranty gives the buyer a claim for damages. An untrue loan representation is a trigger: it stops new lending and is an Event of Default.

Key point

Lenders rarely sue on a representation. An untrue one lets them stop lending, so the borrower must come to them and ask for a waiver.

Also in this chapter

  1. Why lenders want a trigger, not damages
  2. The ten statements in clause 15
  3. Some statements repeat, others speak once
  4. Qualifiers decide whether there is a default
  5. Two windows around completion
  6. What an untrue statement sets off
  7. A known problem is written into the statement
  8. Your job

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