Invoking a MAC is always likely to be considered a last port of call but following the case of Grupo Hotelero Urvasco SA v Carey Value Added SL there are now some take away points we can consider when negotiating MACs in the context of loan financings:

  • A MAC on the financial condition versus the business of an obligor – the Grupo case indicates that financial condition will be construed narrowly, generally by reference to the latest available accounts. The LMA has always provided an option to refer to the business of the group or an obligor and we might now see some further negotiation on this point, particularly when wanting to rely on a MAC for a drawstop event as the term “business” is not tied to when the last set of accounts was required to be delivered.
  • In certain cases, the MAC representation may be required to be repeated at appropriate times – the LMA has made amendments to address this issue.
  • Change must not be temporary – consider setting time limits after which the MAC will no longer be considered temporary.
  • The MAC clause cannot be invoked for pre-existing circumstances – consider agreeing issues known to the arrangers/lenders in a side letter.