01. Introduction and Overview of Debt Agreements
Introduction
- Corporate bonds and Credit Agreements involve large loans to corporations
- Class is about the contractual provisions of these lending arrangements

macro perspective: general purpose

micro perspective: how clauses should be constructed, exceptions

nano perspective: is expression ambiguous, does the literal meaning conforms what we intended
- Credit Agreements

typically/ mostly with banks
 one bank
 syndicate

types
 term loan: due on a specific date
 revolvers: co. can borrow and repay up to a certain amount (line of credit)
 difficult to transfer your participation to another bank
 letters of credit: co. handle payment for goods purchased, future obligation
 credit facilities: multiple types of agreement
- Corporate Bonds

Debt Securities

Often issued publicly and traded

Multiple holders of bonds of same issue
 Insurance companies
 Other institutional investors
 Few retail investors

Indenture and Certificate

Some bonds are "private placements:" not publicly issued, less trading, usually no
"indenture" but Note Purchase Agreement (or so).
- Comparison

Corporate Bonds
 Holdings tend to be more dispersed than Lenders in Credit Agreement
 Trading is more frequent than trading/assignment in Credit Agreement

To the extent Credit Facility involves ongoing obligations of lenders (as in revolver, letter of credit), assignment is difficult.
 Not doable via bonds.
o Interest rate variable versus fixed
 Variable: revolvers tied to market rate, LIBOR (determined by a no. of banks)
o trading in corporate bonds
 public placement
 larger number of holders
 trading frequently

trading/ assignment in credit agreement
 private placement
 lower no. of creditors, little or no trading
- Focus of the Course

Study contractual provisions in agreements through Problem Sets
 What is purpose of provisions?
 How do provisions within one agreement relate to other provisions in same agreement?
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Buy the full version of these notes or essay plans and more in our Corporate Bonds and Credit Agreement Outlines.