Debt commitment letters and acquisition agreementsTypes of documentation
What documentation is typically used in your jurisdiction for acquisition financing? Are short-form or long-form debt commitment letters used and when is full documentation required?
The facilities agreement and intercreditor agreement in an Irish acquisition financing are usually based on the LMA standard forms.Level of commitment
What levels of commitment are given by parties in debt commitment letters and acquisition agreements in your jurisdiction? Fully underwritten, best efforts or other types of commitments?
Lenders are not generally party to acquisition agreements in Ireland. Commitment letters usually provide for fully underwritten debt.Conditions precedent for funding
What are the typical conditions precedent to funding contained in the commitment letter in your jurisdiction?
Typical conditions precedent include the provision of:
- corporate authorisations (ie, board minutes and, where the summary approval procedure is being availed of (see question 15), shareholder resolutions);
- signed acquisition-related documentation;
- signed facility, intercreditor, and credit support documentation;
- legal opinions;
- group structure charts;
- financial statements; and
- details of insurances.
Are flex provisions used in commitment letters in your jurisdiction? Which provisions are usually subject to such flex?
Flex provisions are not a key feature of acquisition finance in Ireland, but to the extent that they are included, they tend to be pricing-specific.Securities demands
Are securities demands a key feature in acquisition financing in your jurisdiction? Give details of the notable features of securities demands in your jurisdiction.
Securities demands are not currently a key feature of acquisition finance in Ireland.Key terms for lenders
What are the key elements in the acquisition agreement that are relevant to the lenders in your jurisdiction? What liability protections are typically afforded to lenders in the acquisition agreement?
Acquisition of a public listed company
Lenders will want to review the Rule 2.5 Announcement and the offer document or scheme circular to ensure that it is consistent with the terms and conditions set out in the Rule 2.5 Announcement. The underlying facilities agreement will impose restrictions on the terms and conduct of the offer or scheme.
Acquisition of a private company
Lenders will typically review the acquisition agreement to ensure that it has been reasonably negotiated in terms of warranty cover and the cap on liability. Lenders may also require that the seller warranties be repeated at completion as a condition of financing. Lenders will usually expect that, for the duration of the term of the facility, the buyer will have the ability to charge or assign the benefit of any part of or any of its rights under the acquisition agreement to the lender by way of security for the facility provided to finance the acquisition. The buyer may also be required to give warranties to the lender as to the effectiveness of this assignment. Lenders will usually insist that they be consulted before any condition to completion in the acquisition agreement is waived.Public filing of commitment papers
Are commitment letters and acquisition agreements publicly filed in your jurisdiction? At what point in the process are the commitment papers made public?
Neither the term sheet nor the acquisition agreement relating to the acquisition of a private company are publicly filed. Where the target is an Irish company, a filing in respect of any changes to the board or the company secretary of the target company will be made in the CRO. In addition, changes to the shareholding of the target will appear in the target’s next annual return filed in the CRO and, to the extent that the target, buyer or seller file their financial statements with the CRO, details of the acquisition may be included in these financial statements. Information filed in the CRO is publicly available.
In relation to the acquisition of a public company to which the Takeover Rules apply, the Rule 2.5 Announcement will contain information on how the deal is to be financed, whether by way of external financing or by using the offeror’s own cash resources.
In addition, the Takeover Rules require that the offer document or scheme circular circulated to shareholders in connection with the proposed takeover contain: a description of how the offer is to be financed and the source of the finance; the names of the principal lenders or arrangers of such finance; and, if the offeror intends that the payment of interest on, repayment of or security for, any liability (contingent or otherwise) will depend to any significant extent on the business of the offeree, a description of the arrangements contemplated or, if that is not the case, a negative statement to this effect.
All documents or information relating to the offer sent to shareholders and all announcements made during an offer period must be published on a website as soon as possible and in any event by no later than 12 pm on the day following their publication or despatch to shareholders and must remain there during the course of the offer and must be sent to the Irish Takeover Panel (the body responsible for enforcing the Takeover Rules) and to the advisers to all other principals concerned with the offer or any competing offer. To the extent that a prospectus is required, once approved, it will be published on the CBI’s website and an advertisement of its publication must be placed in a newspaper circulating in Ireland.
If the offeror intends that the payment of interest on, repayment of or security for, any liability (contingent or otherwise) will depend to any significant extent on the business of the offeree and has therefore included a description of the arrangements in the offer document or scheme circular, the offeror must ensure that documents relating to the financing arrangements for the offer are made available for inspection and published on its website from the publication of the offer document or scheme circular until the end of the course of the offer. The Irish Takeover Panel may consider permitting the offeror to redact certain information in the financing documents if the information is commercially sensitive and the redaction would not render the document unintelligible; however, in practice, redaction is rarely permitted.
Where the target, buyer or seller company has a foreign listing, for example, on the NYSE or the NASDAQ, a copy of the transaction agreement may have to be publicly filed in order to comply with filing requirements in the jurisdiction of its listing.