Term sheets, mandates and confidentiality

Use of term sheets in loan transactions

Term sheets are used at the very start of a financing transaction (whether bilateral or syndicated). The main purpose of a term sheet is to set out the 'heads of terms' for a transaction, which are then used:

1. •

   by the lender(s) for obtaining credit approval

2. •

   by the borrower for obtaining its corporate authorisations for the transaction (eg board or shareholder approval)

3. •

   by lawyers for the lender(s), as the basis for drafting the facility documents and any related documents

4. •

   by the borrower’s lawyers, to review the draft facility documents and other related documents, and

5. •

   if the loan is syndicated from the outset, by potential members of the syndicate to decide whether they will participate in the transaction

Lawyers are often involved in the drafting and negotiation of term sheets, particularly for more complex transactions. On more straightforward deals (such as a general corporate purposes loan for a corporate borrower),