Europe: Can an obligor's consent be taken at face value?

What to consider when borrower consent to a loan transfer is required

In brief

Welcome to the November edition of "In the Know", Baker McKenzie's leveraged finance newsletter that analyses significant trends and salient legal issues for participants in leveraged finance and high-yield markets around the globe.


Contents

Lenders and their legal advisers carefully check the capacity of obligors and the due authorisation of their signatories when a deal commences. In this edition, we consider the issues arising when consent is needed from obligors during the life of a facility. The recent English case of CRF I Ltd v. Banco Nacional de Cuba and another [2023] EWHC 774 (Comm) is a cautionary reminder of the consequences of failing to obtain obligors' approval going forward.

*A version of this article first appeared in the October 2023 issue of "Butterworths Journal of International Banking and Financial Law".

Key takeaways

  • An obligor's capacity and authority to give consent is a matter for the law of such obligor's jurisdiction of incorporation.
  • The giving of requisite consent is relevant not only at the outset of a transaction but may also be necessary to ensure the smooth operation of the facility throughout a transaction.
  • Where prior obligor consent is required to transfer a loan participation, contemporaneous evidence as to capacity and authority should be provided.
  • Contractual conditions to assignments or transfers should be strictly complied with to ensure that an effective transfer of legal title occurs.

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Contact Information
Matthew Cox
Partner at BakerMcKenzie
London
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matthew.cox@bakermckenzie.com
Lana Ahern
Associate at BakerMcKenzie
London
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lana.ahern@bakermckenzie.com
Gabby White
Senior Knowledge Lawyer at BakerMcKenzie
London
gabby.white@bakermckenzie.com

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