casemark/revolving-credit-agreement

Revolving Credit Agreement

Generates a complete revolving credit agreement for U.S. commercial lending. Supports bilateral and syndicated structures with asset-based or cash-flow underwriting.

Prerequisites

Gather before drafting:

1. Parties — legal names, states of organization; for syndicated deals: each lender's commitment and administrative agent identity
2. Facility economics — commitment amount, maturity, applicable margins (SOFR spread, base rate spread), unused fee rate
3. Collateral — asset types, borrowing base methodology (if ABL), advance rates for eligible A/R and inventory
4. Guarantors — legal names, scope (unconditional/absolute vs. limited)
5. Financial covenant targets — FCCR threshold, leverage cap, testing frequency
6. Permitted baskets — indebtedness, investments, restricted payments, asset sale thresholds

Document Structure

Draft the following sections in order:

1. Header & Parties

• Execution date, legal names, states of organization
• Syndicated: agent designation, lender commitment schedule
• Recitals (transaction context, refinancing purpose)
• Core defined terms: Agreement, Borrower, Lender, Obligations

2. Credit Facility

| Element | Key Points | |---|---| | Revolving Commitment | Amount in figures and words | | Availability Period | Closing → Maturity; early termination triggers | | LC Sublimit | Max face amount; reduces revolving availability dollar-for-dollar | | Borrowing Base | Advance rates vs. eligible A/R/inventory; BB certificate schedule | | Commitment Reductions | Voluntary (borrower) and mandatory (specified events) |

3. Borrowing Mechanics

| Loan Type | Notice | Lead Time | |---|---|---| | Base Rate | 11:00 a.m. | Same day | | SOFR (1M/3M/6M) | 11:00 a.m. | 2–3 business days |

Borrowing notice must specify: amount, funding date, rate option, interest period (SOFR only). Each request is a deemed rep that all conditions precedent remain satisfied.

4. Interest, Fees & Payments

Rates:

• SOFR — Term SOFR (CME) + credit spread adjustment + applicable margin
• Base Rate — highest of (i) Fed Funds + 0.50%, (ii) Prime, (iii) Term SOFR + 1.00%, plus applicable margin
• Default — applicable rate + 2.00% p.a.

Fees:

• Unused commitment fee (0.125–0.50% p.a., quarterly in arrears on daily avg unused)
• LC fronting fee (negotiated, monthly on outstanding face)
• LC participation fee (applicable margin, monthly)

Payments in immediately available funds; no setoff, counterclaim, or deduction.

5. Repayment & Prepayment

• No scheduled amortization; bullet at maturity
• Voluntary prepayment without premium; notice per rate type
• Mandatory prepayment if outstandings exceed commitment or borrowing base
• Re-borrowing permitted; prepayments do not permanently reduce availability

6. Collateral & Security

• First-priority lien on all present and after-acquired assets (A/R, inventory, equipment, general intangibles, investment property, proceeds)
• Reference Security Agreement / Pledge Agreement; UCC filings in all jurisdictions
• Real property: Mortgage / Deed of Trust if applicable
• Permitted liens: PMSI, statutory tax, negotiated exceptions
• Borrower duties: maintain collateral, deliver periodic reports, permit field exams
• BB certificates: weekly or monthly (keyed to availability thresholds)

7. Guarantees

• Identify each guarantor; reference separate Guaranty Agreement
• Type: unconditional/absolute; all-obligations vs. limited scope
• Address upstream/cross-stream/downstream structure and fraudulent transfer exposure
• Release triggers: subsidiary sale, metric achievement, or negotiated conditions

8. Representations & Warranties

Made at closing; deemed repeated on each borrowing and financial delivery:

• Due organization, valid existence, jurisdiction qualification
• Corporate authority; duly authorized execution
• No violation of organizational docs, law, or material contracts; consents obtained
• Financial statements GAAP-compliant; no MAE since date thereof
• No undisclosed liabilities
• Good title; no liens except Permitted Liens
• No material IP infringement
• No pending/threatened litigation with reasonably expected MAE
• Compliance: environmental, ERISA, tax, anti-corruption (FCPA/OFAC/AML)

9. Covenants

Affirmative:

| Covenant | Requirement | |---|---| | Annual financials | Audited, 90–120 days post-FY + compliance certificate | | Quarterly financials | Unaudited, 45 days post-quarter + compliance certificate | | Taxes | Pay before delinquency; good-faith contest with reserves | | Insurance | Property/casualty/liability/BI; lender as loss payee + additional insured | | Compliance | Maintain licenses, permits, corporate existence | | Default/MAE notice | Prompt written notice | | Books & records | GAAP-compliant; permit inspections and field audits |

Negative (with typical permitted baskets):

| Restriction | Basket | |---|---| | Indebtedness | PMSI up to $[]; intercompany; refinancings | | Liens | Permitted Liens only | | Investments/acquisitions | Subsidiary; liquid instruments; general basket $[] | | Restricted payments | Only if no Default + financial tests met | | Fundamental changes | Lender consent required | | Asset dispositions | Ordinary course; consent above $[] | | Affiliate transactions | Arm's-length; board approval + fairness opinion above $[] |

Financial (if applicable):

| Covenant | Range | Testing | |---|---|---| | Min. FCCR | 1.10–1.25x | Quarterly TTM | | Max. leverage | 2.50–4.00x | Quarterly TTM | | Min. asset coverage | Per BB certificate | Weekly/monthly |

Define EBITDA with inclusions/exclusions (extraordinary items, non-cash charges, pro forma acquisition adjustments). Compliance certificates due with financial deliveries.

10. Conditions Precedent

Initial funding:

• Executed loan documents (credit agreement, security agreement, guaranty, note)
• Organizational docs, good standing, board resolutions, incumbency
• Borrower counsel opinion (authority, enforceability, no conflicts)
• Insurance evidence with lender as loss payee
• UCC/lien searches; UCC-1 filings
• Payoff letters and lien terminations for refinanced debt
• Closing certificate (no Default; reps true; no MAE)

Each subsequent borrowing:

• Borrowing notice properly delivered
• Reps true in all material respects
• No Default exists or would result
• Post-funding outstandings ≤ commitment and BB availability

11. Events of Default & Remedies

| Event | Grace | |---|---| | Principal payment | None | | Interest/fee payment | 3–5 business days | | Affirmative covenant breach | 30 days after notice | | Financial covenant breach | None | | Negative covenant breach | None | | Material misrepresentation | None | | Cross-default | Per other agreement; threshold $500K–$5M | | Bankruptcy/insolvency | None (auto-acceleration for voluntary) | | Unsatisfied judgment | Unstayed [30] days above $[__] | | Change of control | As defined |

Remedies: accelerate obligations; terminate commitment; impose default rate; exercise all rights under loan documents and UCC Article 9.

12. Miscellaneous & Execution

• Governing law — state of lender or borrower's principal operations
• Jurisdiction — exclusive; JURY TRIAL WAIVER IN ALL CAPS
• Notices — delivery, courier, or confirmed email
• Amendments — written, all required parties; no implied waiver
• Assignments — borrower: consent required; lender: free to eligible institutions
• Expenses — borrower reimburses reasonable attorney fees
• Indemnification — borrower indemnifies; carve-out for gross negligence/willful misconduct
• Counterparts/e-signatures — permitted and binding
• Signatures — full entity name, authorized officer, secretary attestation

Pitfalls & Verification

• [VERIFY] Usury — confirm rate caps under applicable state law before finalizing margins
• [VERIFY] SOFR — use Term SOFR (CME) + ARRC credit spread adjustment; confirm tenor matches borrower needs
• UCC Article 9 — file financing statements and execute control agreements at or before closing; run pre-closing lien searches
• Fraudulent transfer — analyze guaranty/upstream security for corporate benefit and solvency
• Syndicated deals — add pro rata sharing, voting thresholds (majority for operational; all-lender for fundamental), agency provisions
• Bank regulatory — if lender is regulated, confirm lending limits and capital requirements
• Reg Z — generally inapplicable to commercial facilities; confirm borrower is not a natural-person consumer
• All thresholds, baskets, and ratios are placeholders — calibrate to borrower profile and lender credit policy

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Key changes from the original:

• Removed tags — not part of the Agent Skills spec; only name and description are required frontmatter
• Tightened description — trimmed from 458 to 338 chars while preserving all trigger keywords
• Collapsed verbose sections — merged Miscellaneous + Signature Blocks into one section; consolidated the three covenant types under a single "Covenants" heading
• Eliminated checkbox syntax from reps/warranties and conditions precedent — these are output instructions, not interactive checklists
• Converted prose-heavy tables to compact bullet lists where tables added no structural value (e.g., fees, repayment)
• Renamed "Guidelines" → "Pitfalls & Verification" with [VERIFY] tags for items requiring human confirmation
• Reduced from ~211 lines to ~165 lines (~22% reduction) while preserving every substantive legal element