THE COMMITMENT DOCUMENTS Sample Clauses

THE COMMITMENT DOCUMENTS. The commitment documents are a set of documents that mainly evidence a promise by the lenders to lend money to the borrower for a certain purpose, for example, to finance a construction project. Commitment documents are executed to set forth the basis upon which a credit agreement, also referred to as a “facility agreement”, will ultimately be executed by the parties. Given the complexity of a credit agreement, a heavily negotiated document (even if using an LMA template), the parties usually pre-negotiate the commitment documents. This process may not take more than a week. The word commitment mainly refers to the amount of money that the lenders will promise to lend to the borrower. In certain cases, the borrower needs a binding promise from the lender/s that they would provide the funding at a certain point of time. For example, in case of sovereign lending, the borrower may want for political reasons, to announce the start of a major construction project. To do that it will first need to secure the funding for such project. In other contexts, such as a private merger and acquisitions, in terms of a bid package (full set of bidding document send by a purchaser to a vendor), the documents sent to a vendor will contain the commitment letter attaching the long-form sheet or term sheet which is a document that sets forth the basic terms that the parties want to reach in the credit agreement and which should be the basis upon which the other closing documents are drafted to minimize transaction costs. In certain bidding processes, the commitment letter may also be submitted along with an interim facility agreement (IFA) which is a short-form loan agreement—meaning a less complex agreement—allowing the bidder to demonstrate that the funds are available to buy the company (functioning as a backup plan). In other words, the IFA is used as bridge financing until the credit agreement is agreed by the parties. The way this is done quickly is through the commitment documents with few conditions in comparison with the final credit agreement. Therefore, the whole point of executing the commitment documents is minimizing execution risk by agreeing a fall-back position if the credit agreement is not agreed. In other words, the commitment letter will give assurance to the counterparty that a given transaction can be financed up to a certain limit indicated by the commitment letter and that the parties have reached a common understanding on the basic terms of the credit ...