Project finance—conditions precedent

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

  • Project finance—conditions precedent
  • Purpose and timing of conditions precedent in project finance
  • When in the transaction are conditions precedent required to be provided?
  • Purpose of conditions precedent to initial drawdown
  • Purpose of conditions precedent to each drawdown
  • Where to start with drafting conditions precedent in a project finance transaction
  • Specific conditions precedent for project finance transactions
  • Conditions precedent to initial drawdown
  • Conditions precedent to each drawdown
  • Satisfying conditions precedent in a project finance transaction
  • More...

Project finance—conditions precedent

Many of the usual conditions precedent for a typical syndicated loan facility will also be applicable to a project finance transaction. For information on those conditions precedent, see Practice Note: Conditions precedent.

This Practice Note looks at additional conditions precedent which may apply in a project finance transaction.

Purpose and timing of conditions precedent in project finance

Conditions precedent are included in finance documents for the benefit of the lenders. Conditions precedent give the lenders justification for refusing to lend if they are not sufficiently comfortable about the issues on which they have based their credit appraisal.

Conditions precedent confirm key information about:

  1. the borrower and any other obligors (eg their capacity to enter into the transaction documents and their financial standing), and

  2. the transaction (eg adequacy of security and receipt of necessary licences and approvals)

In a project finance transaction lenders also need particular assurances about the viability of the project and the terms of the contracts which underpin the project.

When in the transaction are conditions precedent required to be provided?

As in many commercial lending transactions, a project finance transaction usually contains:

  1. conditions precedent to initial drawdown, and

  2. conditions precedent to further drawdowns

Conditions precedent to initial drawdown tend to be:

  1. largely (but not entirely) of a documentary nature, and

  2. listed in a schedule to the facility agreement or common terms agreement (CTA)—see Project

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