Mezzanine Loan Agreement Template for England and Wales

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Key Requirements PROMPT example:

Mezzanine Loan Agreement

"I need a Mezzanine Loan Agreement for a £50M facility to finance a real estate development project in London, with PIK interest provisions and conversion rights exercisable after January 2025, ensuring subordination to our existing senior facility of £150M."

What is a Mezzanine Loan Agreement?

The Mezzanine Loan Agreement is a crucial document in complex financing structures, particularly used in leveraged buyouts, real estate developments, and corporate growth financing. It establishes the terms for a type of financing that combines elements of debt and equity, typically providing higher returns for lenders while offering more flexible terms for borrowers compared to senior debt. Under English and Welsh law, this agreement must carefully address intercreditor relationships, security priorities, and regulatory requirements while providing clear mechanisms for both debt service and potential equity participation. The document is particularly important when companies need additional financing beyond what traditional senior lenders will provide, or when seeking to optimize their capital structure without diluting existing equity.

What sections should be included in a Mezzanine Loan Agreement?

1. Parties: Identification of lender, borrower, and any guarantors

2. Background: Context of the loan and relationship to senior debt

3. Definitions: Key terms used throughout the agreement including financial metrics, security terms, and regulatory references

4. Facility: Terms of the loan, amount, purpose, and availability period

5. Interest and Fees: Interest calculation, payment terms, default interest, and applicable fees

6. Repayment: Repayment terms, schedule, and prepayment provisions

7. Security: Security arrangements, subordination, and ranking of security interests

8. Representations and Warranties: Borrower's statements of fact and assurances regarding legal, financial, and operational status

9. Covenants: Positive and negative obligations of the borrower including financial covenants

10. Events of Default: Circumstances constituting default and consequences including acceleration rights

11. Transfers and Amendments: Provisions regarding assignment, transfer, and amendment of the agreement

12. Governing Law and Jurisdiction: Choice of law and jurisdiction provisions

What sections are optional to include in a Mezzanine Loan Agreement?

1. Conversion Rights: Terms for converting debt to equity, including conversion price and mechanisms

2. Intercreditor Provisions: Detailed provisions governing the relationship with senior lenders and other creditors

3. PIK Interest Provisions: Terms for payment-in-kind interest including calculation and capitalization

4. Board Observer Rights: Provisions granting the lender rights to observe board meetings and receive information

5. Exit Provisions: Terms governing mandatory prepayment upon exit events or change of control

What schedules should be included in a Mezzanine Loan Agreement?

1. Form of Drawdown Request: Standard form for requesting loan disbursements

2. Conditions Precedent: List of required documents and conditions for loan effectiveness

3. Security Documents: Forms of security agreements, debentures, and charges

4. Repayment Schedule: Detailed payment schedule including principal and interest payments

5. Form of Compliance Certificate: Template for periodic compliance reporting and financial covenant calculations

6. Financial Covenants Calculations: Detailed methodology for calculating financial covenants

7. Form of Transfer Certificate: Standard form for documenting transfers of loan participations

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok��˰� | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Private Equity
Real Estate
Infrastructure
Manufacturing
Technology

Relevant Teams

Finance
Treasury
Legal
Corporate Development
Risk Management
Investment
Compliance

Relevant Roles

Chief Financial Officer
Finance Director
Treasury Manager
Investment Director
Legal Counsel
Corporate Finance Manager
Debt Fund Manager

Industries

Financial Services and Markets Act 2000: Primary legislation governing financial services regulation in the UK, establishing regulatory framework and requirements for financial activities

Consumer Credit Act 1974: Regulates consumer credit agreements and may be relevant if the borrower falls under consumer protection scope

Companies Act 2006: Key legislation governing company law, including registration of charges, corporate authority, and directors' duties

Law of Property Act 1925: Fundamental legislation concerning property rights and security interests in real property

Insolvency Act 1986: Governs corporate insolvency proceedings and creditors' rights in insolvency scenarios

FCA Regulations: Financial Conduct Authority regulations governing conduct and consumer protection in financial services

PRA Requirements: Prudential Regulation Authority requirements for financial institutions' stability and risk management

Money Laundering Regulations 2017: Anti-money laundering requirements and due diligence obligations for financial transactions

Companies (Registration of Charges) Regulations 2009: Requirements for registering security interests and charges against company assets

Land Registration Act 2002: Governs registration of interests in land and real property security arrangements

Unfair Contract Terms Act 1977: Controls unfair terms in contracts and limits ability to exclude certain liabilities

Contracts (Rights of Third Parties) Act 1999: Governs third party rights in contracts and their ability to enforce contractual provisions

Late Payment of Commercial Debts (Interest) Act 1998: Regulates interest charges on late payments in commercial transactions

Financial Services (Distance Marketing) Regulations 2004: Requirements for financial services contracts conducted at a distance

Enterprise Act 2002: Provisions affecting enforcement of security and insolvency proceedings

Rome I Regulation: EU-derived rules on governing law for contractual obligations, retained in UK law post-Brexit

Brussels Recast Regulation: Rules on jurisdiction and enforcement of judgments, as retained in UK law post-Brexit

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Let's create your Mezzanine Loan Agreement

What is a Mezzanine Loan Agreement?

What sections should be included in a Mezzanine Loan Agreement?

What sections are optional to include in a Mezzanine Loan Agreement?

What schedules should be included in a Mezzanine Loan Agreement?

Authors

Alex Denne

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