It is common for facility agreements to require the borrower(s) to prepay all or part of the facility on the occurrence of certain events, known as mandatory prepayment events. For a general discussion of common mandatory prepayment events, see Practice Note: Repayment, prepayment and cancellation.

Leveraged facilities agreement have traditionally contained a more extensive list of mandatory prepayment events than an investment grade loan agreement. Mandatory prepayment events on leveraged finance transactions have typically included:

1. •

   illegality—where it becomes illegal for a lender to continue to fund its participation, this triggers mandatory prepayment of that lender's participation

2. •

   change of control/exit—where the sponsor(s) no longer controls the business, this triggers mandatory prepayment of all the facilities (see Acquisition finance—mandatory and voluntary prepayment clauses below)

3. •

   receipt by the group of disposal proceeds, proceeds of insurance claims and proceeds of claims under acquisition documents (proceeds)—this obliges the group to apply the proceeds towards prepayment of the facilities (subject to exceptions) (see Proceeds below), and

4. •

   excess cashflow in the group as evidenced by the