Q&As

What factors should a lender consider if it is asked to waive a default under a loan agreement?

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Produced in partnership with Brian Cain
Published on LexisPSL on 23/05/2018

The following Banking & Finance Q&A produced in partnership with Brian Cain provides comprehensive and up to date legal information covering:

  • What factors should a lender consider if it is asked to waive a default under a loan agreement?
  • Summary
  • Doing nothing about a default
  • Waivers—the request
  • Waivers—loan agreement mechanics
  • Contents of the waiver

What factors should a lender consider if it is asked to waive a default under a loan agreement?

This Q&A discusses the factors a lender will need to consider if it is asked to waive an event of default under a loan agreement.

The following Practice Notes provide further guidance on some of the issues that arise where a lender considers a waiver request:

  1. Debt waivers, extending maturity and debt rescheduling

  2. Covenant waivers and resets

  3. Amendments, waivers and consents—overview; and

  4. Getting ready to enforce security

Summary

This Q&A looks at the key issues for a lender faced with a request for a waiver of a default under a loan agreement. It discusses the provisions of the loan agreement that should be checked, the practical issues that a lender should consider and some items that might be included in any waiver agreement between the lender and the borrower.

Doing nothing about a default

Once a default occurs under a loan agreement, a lender must consider whether it should act. Simply doing nothing could have serious consequences for the lender as it may lose the right to demand repayment based on that default. This risk arises even where there is an express ‘no waiver’ provision stating delay in exercising a right does not mean the party waives that right if the lender’s conduct amounts to an affirmation of the loan agreement after

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