Yield Protection Clauses in Credit Agreements

Yield is money earned on a loan, calculated as the annual percentage rate of interest multiplied by the term of the loan. Borrowers and lenders negotiate the applicable interest rates and fees in respect of credit at the onset of negotiations so as to provide the lenders with a desired all-in yield. The yield should reflect the creditworthiness of the borrower, as well as the general prevailing conditions in the syndicated credit market. Lenders must also take into account other factors, such as any reserves they may be required to maintain in respect of loans that they make, general "capital adequacy" requirements that apply to certain types of lenders, and potential withholding or other taxes that may be imposed in respect of the credit facilities, all of which could have the effect of reducing the net amount of yield that the lenders are actually able to realize.