a***m
发帖数: 666 | 1 The deed of subordination is about a loan. The borrower is a company, and
the subordinated lenders are the shareholders of the company. One bank acts
as the security agent. I thought the company borrowed money from the
shareholders and the bank just assisted in distributing money from the
shareholders to the company(. But it turned out that the subordinated
lenders( shareholders) have charges with the bank. I am totally confused.
Can someone help me understand the deed ?
Thanks a lot ! | y*******y
发帖数: 71 | 2 Well, subordination, as the name suggests, is to subordinate one obligation
to another. Although it is hard to be 100% sure of the situation you
described below, the most I can make out of it is that there are two loans: one
is the shareholder loan and the other is a loan supposed to be more senior
to the shareholder loan (I will call it a "bank loan"), for which the bank
acts as the security agent. The deed of subordination is used to make sure
that the shareholder loan is "subordinated" to the bank loan. Putting aside
all the legal subtleties and variations, it basically ensures that the
lenders of the bank loan get paid before the lenders of the shareholder loan
(sometimes it is drafted the other way around, i.e., the lenders of the
shareholder loan will not get paid unless and until the bank loan lenders
get paid). The existence of a security agent for the bank loan suggests there are more than one lender for the loan, so one bank has to act on behalf all
the lenders as an agent to take care of the security interest. This indicates that the bank loan is not a small amount. My gut feeling is that this is/was an LBO, correct?
Also. the name "deed of subordination" suggests that the bank acting as the
security agent is not an U.S. bank , correct?
So, all in all, this sounds like a loan document in a cross-border LBO
financing.
OK, above is all my guesswork. Can you let me know from which step I am wrong? :)
acts
【在 a***m 的大作中提到】
: The deed of subordination is about a loan. The borrower is a company, and
: the subordinated lenders are the shareholders of the company. One bank acts
: as the security agent. I thought the company borrowed money from the
: shareholders and the bank just assisted in distributing money from the
: shareholders to the company(. But it turned out that the subordinated
: lenders( shareholders) have charges with the bank. I am totally confused.
: Can someone help me understand the deed ?
: Thanks a lot !
| a***m
发帖数: 666 | 3 I understand what you meant. In the begining I thought the same as you. If
the deed means to subordinate the shareholders' loans to the senior loans
from the bank, the shareholders will not have charges with the bank. The
fact is that all the shareholders have with the bank the charge of the same
amount money the company borrowed.
Company A borrowed 1 million of US dollars. It turns out that Company A and
its all shareholders have the charge of 1 m USD with the bank (the security
agent). Who lent the money to Company A ? The shareholders did not borrow
any money from the bank either.
It is a confusing contract! | y*******y
发帖数: 71 | 4 Is it possible that the Company borrowed $1M loan for which the bank acted
as the security agent and that all
shareholders pledged their shares to the security agent to secure the loan?
In some foreign jurisdictions, they
use the word "charge" instead of "pledge" when the collateral is stock.
Anyhow, this contract is supposed to be shi*y. How else do you expect the
drafsmanship of the documents for
a loan of only $1M? If you can post or send to me the whole contract (with
appropriate redaction of course),
maybe I can be a in better position to make some sense out of it.
Good luck, man. I know the pain of reviewing cra*y contracts.
same
and
security
【在 a***m 的大作中提到】
: I understand what you meant. In the begining I thought the same as you. If
: the deed means to subordinate the shareholders' loans to the senior loans
: from the bank, the shareholders will not have charges with the bank. The
: fact is that all the shareholders have with the bank the charge of the same
: amount money the company borrowed.
: Company A borrowed 1 million of US dollars. It turns out that Company A and
: its all shareholders have the charge of 1 m USD with the bank (the security
: agent). Who lent the money to Company A ? The shareholders did not borrow
: any money from the bank either.
: It is a confusing contract!
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