There are other benefits to debt portability agreements. They can reduce transaction costs with the net savings that are paid to the seller, expedite the conclusion, as no new alternative financing is required, and remove uncertainties about the buyer`s ability to increase debt financing for the purchase on acceptable terms. They may contain, for example. B, a language that ensures that the portability of existing credits is only available to buyers deemed appropriate by the lender. This provision would require careful wording on the part of the lender in order to clearly define the criteria. When debt portability provisions are negotiated, the entity must anticipate the functioning of the terms and conditions at the same time as the planned sale process, in order to ensure a smooth intersection with the terms of the acquisition contracts. However, more lenders have recently agreed to include in the loan agreements a portability clause allowing the loan transaction to be sold without refinancing or repayment of the loan. Instead, the existing loan is transferred to the buyer on the same terms as the current borrower. Alternatively, as portability (because the capital structure can be borne by the owner to the owner) or “Precap” (because the new owner buys the already capitalized business), the concept “will be limited to the viability of the control regime,” Covenant Review warned in a report released last week. “This trend may be encouraging for some borrowers who want to discuss the possibility of including portability clauses in credit agreements with their creditors,” Norton Rose Fulbright LLP lawyer Olga Lenova wrote in a recent blog post.

“The inclusion of such clauses will depend on the circumstances of the borrower and the credit agreement.” There is no doubt that the Covid 19 pandemic has had unprecedented social and economic impacts, including a decline in research and development activities in Canada. The pandemic has also made changes in the way agreements are developed in light of what has become our new normal. Previously, we had indicated that the pandemic had increased the focus on health care, both in existing AM business and in the new agreements. A new trend has also emerged with respect to credit transactions, where lenders agree to include the language of portability in credit documents, which could remove a barrier for private equity groups wishing to engage in venture capital activities. Credit contracts generally involve a change in control provisions that cause a default on the sale or acquisition of the borrower by a third party. Lenders generally require these provisions that require the borrower to repay the existing loan and, if the existing lender wishes to continue to provide loans, they have the opportunity to reassess the risks associated with the change of ownership and to amend the credit agreements.