Finance Deals & Syndicated Lending · glossary
Serious harm to the group's business or finances, to the Obligors' ability to pay, or to the documents' validity. The definition limits some representations, sets the bar in some undertakings, and is an Event of Default on its own. Courts read it narrowly. Definition: Material Adverse Effect · Clause 19.9 · Chapter 5 · Chapter 10
Explained in Chapter 5, Anatomy of a Facility Agreement, of Finance Deals & Syndicated Lending.
Material Adverse Effect. Clauses 15.3, 15.6 and 15.7 promise only that no conflict, other default or claim has, or is reasonably likely to have, a Material Adverse Effect. The definition covers serious harm to the Group's business or finances, to the Obligors' ability to pay, or to the enforceability of the documents. The test is vague on purpose: a lender must prove the harm in court, so lenders threaten it more often than they use it.Read Chapter 8, Representations →
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a material adverse effect on: (a) the business, assets or financial condition of the Group taken as a whole; (b) the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents; or (c) the validity or enforceability of the Finance Documents;Read the definition in the document →
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