Defining the Term Sheet
An Indicative Financing Term Sheet for Export Credit and Commercial Loan Facilities outlines the preliminary financial structure of a project. It serves as a roadmap for borrowers, lenders, and export credit agencies before final documentation.
The main purpose of such a document is to ensure clarity and mutual understanding of financing terms before drafting binding agreements. Therefore, it plays a vital role in reducing risks and avoiding misunderstandings.
Export Credit Facility Structure
The Export Credit Facility covers up to 85% of the foreign portion of a project’s costs. It also includes local costs, insurance, and interest during construction. Drawdowns occur after fulfilling conditions precedent, while repayments follow semi-annual installments under OECD Consensus rules. Facility charges may be floating, linked to LIBOR or EURIBOR, or fixed through CIRR rates. Furthermore, fees include management and commitment charges that define obligations clearly.
Commercial Loan Facility Details
The Commercial Loan Facility covers the remaining uncovered portion, usually 25%. Its lenders often align pari-passu with the ECA facility’s security package. Advances are disbursed according to the commercial contract’s payment terms. Repayments occur in six equal half-yearly installments, with facility charges including margins above EURIBOR or LIBOR. This facility also includes management and commitment fees to reflect commercial risk.
General Conditions and Final Provisions
General conditions cover environmental studies, insurance, taxes, and legal opinions. The borrower bears the costs of external reviews and technical studies. Governing law, arbitration, and confidentiality clauses ensure enforceability and trust. Since the term sheet is indicative, it remains valid for a specified period and is subject to credit committee approval.
As a result, the Indicative Financing Term Sheet provides a clear structure, transparency, and a solid foundation for final, binding agreements.
References
has been added to your cart!
have been added to your cart!
