Yank-the-Bank Clause — A clause in a facility agreement that gives the borrower the right to pay a dissenting member of the loan consortium. As a rule, the borrower does not pay an early repayment premium, but all accrued interest, fees, costs, expenses and. . Dictionary of Law The question is open whether affiliated lenders should be subject to regulation on wind flows. In one approach, where a lender`s affiliates are subject to the Windstream Regulations, “filtered affiliates” (lender affiliates that (i) are managed separately by the lender itself, (ii) have ethical walls between themselves and the lender, and (iii) whose investment policies and decisions are not influenced by the lender or its investment decisions) are excluded. In another approach, which excludes affiliates from Windstream regulation, each lender states that it is not knowingly and intentionally cooperating with any of its affiliates to achieve the same economic effect in relation to the credit group as if such a lender were a net short seller. Windstream`s provisions include a “net short statement” that is made (or is considered to be made) by any lender (other than unrestricted lenders) and generally indicates that the lender is not a net short lender. A net short presentation is usually not made (or is considered to be made) when the loan agreement is concluded, but in conjunction with: A provision of Yank-a-Bank in credit agreements allows a borrower to replace a lender if that lender has defaulted, has become insolvent, requires certain tax compensation payments or, if a lender has refused to accept a proposed change or change in the Agreement. In the case of a proposed amendment, a provision of Yank-a-Bank ensures that an individual lender cannot block a change that requires unanimous approval in order to obtain better terms from the borrower. Refund and Termination. Some credit facilities allow a borrower to repay outstanding amounts to a defaulting lender and terminate the obligations of that defaulting lender.
A Yank-a-Bank provision is not always included in a loan agreement. Borrowers generally negotiate the inclusion of such provisions to ensure that a non-willing lender does not prevent a change that would otherwise be adopted and discourages lenders from requiring certain tax offset payments or performance preservation. Lenders sometimes resist adopting such a provision for fear of being removed from a company because they simply exercise their rights after investing time and energy to sign the agreement. Depending on the outcome of the negotiations, a Yank-a-Bank provision may be limited to amendments that require unanimous approval and that the provision can only be invoked against one or more lenders whose total syndicate percentage is below a certain threshold. Honorarium. While a lender remains a defaulting lender, it is no longer entitled to a commitment fee that would otherwise have been payable according to the loan documentation. It remains to be seen what changes, if any, the COVID-19 pandemic will bring to the ongoing provisions currently settled on lenders. The provisions on defaulting lenders found in many documents today were largely a response to the last financial crisis and were not designed with the current market situation in mind.
In the coming weeks, months and years, these provisions could expand again to reflect the realities of new market conditions. Provisions for net inactivity are the most recent provisions for credit agreements, which were implemented for the first time earlier this year following the bankruptcy of Windstream Holdings, Inc. , which was filed after Windstream lost a court battle with a bondholder over whether Windstream had defaulted on its bonds (hence the name “Windstream Commission”). Windstream commissions are an attempt to protect borrowers from the undesirable behavior of net short-term debt activists. Please note that the calculation of a net short position does not include derivative contracts entered into by a lender in the context of bona fide market-making transactions. In addition, any index that includes the borrower (or any other member of the credit group) should be excluded from the calculation of a net short position as long as the lender (or any other member of the credit group) is not involved in the formation or management of the index and the obligations of the borrower and other members of the credit group as a whole are less than a certain percentage of that index. Interest-bearing account. When a lender becomes a defaulting lender, all funds owed to these defaulting lenders must generally be held by an agent in a deposit account. The parties may indicate whether this account is an interest-bearing account or not. Most syndicated credit documents are silent on this point. The shipping industry is characterized by the need for significant investments, where revenues can be volatile and ships have significant operating costs.
Sometimes lenders` approvals regarding a breach of credit documents are inevitable. Recently, the industry has also faced a situation where some financial institutions have expressed a desire to leave the sector. Changes or waivers affecting these financial institutions can be particularly challenging, and a Yank-a-Bank provision is a way to remedy a situation where another lender can progress. Standard lender cascade. Payments made by a borrower and received by an agent that would otherwise have been payable to the defaulting lender are subject to a cascade. Before a defaulting lender can receive an amount, the agent will apply the product as prescribed in the credit documentation, which includes offsetting with an amount owed to the agent or lender, funds the portion of a loan that a defaulting lender does not finance, and is held in a deposit account to meet a defaulting lender`s potential future financing obligations. Here is a summary of the main parts and terms related to anti-net short commissions, also known as windstream commissions. Replacement of the defaulting lender.
The main recourse of a borrower in his credit documents concerning a defaulting lender is the possibility of replacing such a defaulting lender – the so-called “Yank-a-Bank” provisions. .