Agent Bank Counsel’s Conditions Precedent Satisfaction Letter to the Agent Bank
(“CP Memo”)

Summary

This template is a conditions precedent satisfaction letter to the agent bank or “CP Memo.” Counsel issues the letter to the agent bank to confirm receipt of various agreements and other conditions precedent as required under the credit agreement. This template includes practical guidance, drafting notes, and alternate clauses. What is it? In a credit agreement, the conditions precedent section (typically Article IV) sets forth the documents that the borrower must deliver, the events that need to occur and actions that need to be taken, and conditions that must exist for the consummation and closing of the loan transaction and for the lenders to fund their initial loans. These conditions are known as conditions precedent (CPs). In most credit agreements, the initial funding of the loans and the signing/closing of the transactions will occur on the same day. If your transaction contemplates a separate signing/closing and later funding, this letter will need to be revised to reflect the differences between the CPs required at signing and closing, and the CPs required for lending. The agent bank and lenders require all CPs to be satisfied prior to funding because it gives them comfort that the borrower’s corporate structure, organizational documents, properties, assets, and legal status have been reviewed and that any additional actions to minimize the banks’ risk have been taken. What form should the confirmation take? The form of confirmation will depend on the type of CPs being signed off on. If the condition precedent is confirmation that a document is in the agreed upon final form and is signed by all of the necessary parties, the law firm can confirm that it has received and reviewed the document in agreed upon form and that it has all necessary signature pages in its possession. However, for other CPs which are dealt with by the agent bank itself (as in paragraph 5 of this letter) the law firm acting for the agent bank will only be able to state that they have been advised that the conditions have been satisfied. It is good practice for agent’s counsel to agree on the form of the letter with the agent bank in advance. The agent bank may also have its own standard form of confirmation letter that it requires. Agent bank/Lender issues: The agent bank should be confident that all CPs have been satisfied before sending confirmation of same to the other lenders. The agent bank may request a letter like this one before providing its own conditions precedent satisfaction letter to the lenders. This practice is more predominant in non-U.S.-based transactions. In U.S.-based deals, it is not customary for agent banks or its counsel to provide written confirmation of the satisfaction of the conditions precedent to the lenders in the form of a letter. Confirmation is typically provided either in person, via email or via closing conference call to confirm satisfaction of the CPs and to initiate funding. The agent bank is not in a position to agree to waive any of the CPs in the credit agreement at closing without the consent of the requisite percentage of lenders under the credit agreement. The one exception to this rule is for instances where the credit agreement may expressly provide that, at the discretion of the agent bank, the condition (typically a requirement related to the provision of certain collateral documents, such as mortgages) may be postponed to a date post-closing. This memo is not an opinion: This conditions precedent satisfaction letter is not a substitute for a formal legal opinion. For example, the law firm may be able to confirm that the documents received are in the agreed form and that they have been provided with the relevant signatures, but this letter will not be able to confirm that the actual signatures are genuine, that any of the documents have been duly authorized or executed by any party, or are enforceable against any party. Only the formal legal opinions rendered in connection with the transaction will opine as to such matters.