The Negative Pledge Agreement is a fundamental tool in commercial lending and financing transactions, particularly utilized in unsecured lending arrangements under Danish law. This document is typically employed when a lender requires protection against the borrower granting security interests to other creditors, without taking actual security themselves. The agreement helps maintain the lender's relative position in the borrower's capital structure by preventing the borrower from pledging assets to other creditors, thereby potentially subordinating the lender's position. Used extensively in corporate financing, syndicated lending, and bond issuances, the document outlines specific prohibitions, permitted exceptions, monitoring requirements, and enforcement mechanisms, all structured to comply with Danish legal requirements and market practice.
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Key Requirements PROMPT example:
Negative Pledge Agreement
I need a Negative Pledge Agreement under Danish law for a straightforward corporate loan where our bank is lending 鈧5 million to a mid-sized manufacturing company, with standard permitted security carve-outs for equipment leasing and trade finance.
1. Parties: Identifies and defines the contracting parties - typically the borrower/promisor giving the negative pledge and the beneficiary/promisee
2. Background: Sets out the context of the agreement, including reference to any related facilities or arrangements
3. Definitions and Interpretation: Defines key terms including 'Security Interest', 'Permitted Security', and other relevant concepts
4. Negative Pledge Covenant: The core prohibition against creating or allowing to subsist any security interests over the specified assets
5. Permitted Security: Lists explicitly permitted exceptions to the negative pledge covenant
6. Representations and Warranties: Borrower's confirmations regarding existing security interests and capacity to enter into the agreement
7. Duration: Specifies how long the negative pledge remains in effect
8. Events of Default: Defines circumstances constituting breach and their consequences
9. Remedies: Sets out the rights and remedies available to the beneficiary upon breach
10. Notices: Specifies how and where formal communications between parties should be made
11. Governing Law and Jurisdiction: Confirms Danish law as governing law and specifies jurisdiction for disputes
1. Further Assurance: Requires the borrower to take additional actions to give effect to the negative pledge - include when enhanced protection is required
2. Information Undertakings: Obligations to provide information about assets and potential security interests - relevant for complex commercial relationships
3. Third Party Rights: Addresses whether third parties can enforce the agreement - include when there are multiple beneficiaries or potential assignees
4. Assignment and Transfer: Regulates ability to transfer rights under the agreement - include when transferability is important to the beneficiary
5. Costs and Expenses: Allocates responsibility for costs - include when significant expenses are anticipated
6. Severability: Provides for survival of provisions if others are invalid - include in complex agreements or high-risk jurisdictions
7. Amendments and Waivers: Procedures for modifying the agreement - include when flexibility may be needed
1. Schedule 1 - Specified Assets: Detailed list of assets covered by the negative pledge
2. Schedule 2 - Existing Security Interests: List of security interests existing at the time of the agreement
3. Schedule 3 - Form of Compliance Certificate: Template for periodic confirmation of compliance with the negative pledge
4. Appendix A - Permitted Security Interest Categories: Detailed descriptions and parameters of permitted security interests
5. Appendix B - Notice Requirements: Detailed procedures for providing notices under the agreement
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking
Financial Services
Corporate Lending
Investment Banking
Private Equity
Real Estate
Infrastructure
Manufacturing
Energy
Telecommunications
Relevant Teams
Legal
Finance
Treasury
Risk Management
Compliance
Corporate Banking
Credit
Investment Banking
Debt Capital Markets
Corporate Development
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Legal Counsel
Corporate Lawyer
Loan Officer
Credit Manager
Risk Manager
Compliance Officer
Investment Manager
Corporate Banking Manager
Debt Capital Markets Manager
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