The Client Asks: Can We Pay Down Our Debt?

Summary

This practice note explains how you should proceed when a client calls and asks whether the credit agreement permits them to pay off their loans (or buyback notes). The steps below describe how to conduct this analysis efficiently. These include examples from the loan documentation and where in these agreements to find the relevant provisions—which, for example, cover whether a voluntary prepayment is permitted and whether the loans being repaid are subject to prepayment premiums such as soft calls or hard call. You will also be pointed to anything else that the loan documents might require of the borrower. After going through these steps, you can create a summary of your analysis, using the template provided in Debt Repayment Analysis Chart. A copy of this chart, as a stand-alone item, is at the end of this practice note.