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Direct agreements are very common in project finance transactions.
A direct agreement is an agreement which gives the lenders to the project direct rights in respect of certain key project documents. Those rights are explained in Direct agreements in project finance transactions—key provisions.
The project documents are the contracts which set out each party's responsibilities in relation to a project and the success or failure of most projects often depends heavily on them.
For a project which is not yet built, one of the borrower's most valuable assets will be its rights under the construction contract. Once the project is fully constructed, project documents with significant value tend to include the operation and maintenance contract and any supply and off-take contracts.
Project finance lenders typically take security over all of the project company's rights under the key project documents as part of the security package (see Practice Note: Security in project finance transactions).
In addition to such security, project finance lenders usually expect to have direct contractual relationships with the counterparties to the key project documents. This is achieved by way of direct agreements.
Direct agreements are also commonly called 'tripartite agreements' which reflects the fact that it is an agreement between three parties ie:
a project counterparty such as the
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