MAC clauses for a bilateral facility agreement
MAC clauses for a bilateral facility agreement

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • MAC clauses for a bilateral facility agreement
  • Where are MAC clauses used in facility agreements?
  • Material Adverse Effect definition
  • MAC representation
  • MAC event of default
  • Brexit and MAC clauses

Where are MAC clauses used in facility agreements?

There are three key places where the concept of material adverse change (MAC) or material adverse effect (MAE) occurs in a facility agreement:

  1. the definitions clause—this will typically include a definition of Material Adverse Effect

  2. the list of representations—this will typically include a representation that there has been no material adverse change, and

  3. the list of events of default—this will typically include an event likely to have a material adverse effect as an event of default

This Practice Note sets out:

  1. a sample MAE definition, with drafting notes

  2. a sample MAC representation with drafting notes, and

  3. a sample MAE event of default with drafting notes

It is also common for borrowers to attempt to qualify certain representations, undertakings and events of default by reference to material adverse effect.

See Practice Note: Material adverse change and material adverse effect in facility agreements for information on:

  1. declaring an event of default on the basis of the material adverse change event of default and the consequences of accelerating the loan as a result or using the event of default as a drawstop

  2. using the material adverse effect definition to qualify representations, covenants and events of default, and

  3. the material adverse change representation

For commentary on MAC clauses in mandate letters, see Practice Note: Loan