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: The UK is leaving the EU on Exit Day (as defined in the European Union (Withdrawal) Act 2018). This has an impact on this Practice Note. For guidance, see News Analysis:Brexit and Material Adverse Change 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. For more information on how MAC and MAE wording is used in facility agreements, see Practice Note: Material adverse change and material adverse effect in facility agreements.

For commentary on MAC clauses in mandate letters, see Practice Note: Loan Market Association mandate letter—commentary on MAC