Finance Deals & Syndicated Lending · glossary
A drawstop is the lenders' right to refuse a new loan under a facility agreement. It applies while a default is continuing, or if a representation repeated on the drawing date is untrue. It does not end the facility or make loans already made due. That needs an event of default and a notice from the agent.
The lenders' right to refuse new money while a Default is continuing or a repeating representation is untrue. They demand nothing back, but lend no more until the problem is fixed. A rollover can be refused only for an Event of Default. Clause 4.6 · Chapter 7
Explained in Chapter 7, Utilisation and Repayment, of Finance Deals & Syndicated Lending.
A refusal to lend for this reason is a drawstop. The lenders do not demand their money back. They simply lend no more until the problem is fixed.Read Chapter 7, Utilisation and Repayment →
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A condition in the loan agreement that stops the borrower drawing. The lenders still have their other rights, but nothing new is lent until the problem is fixed or waived.
In the usual London form, a new loan stops on any default, even one that is not yet an event of default. A rollover of an existing loan stops only on an event of default.
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