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  UNITAR / PFT Online Course on
'DRAFTING AND NEGOTIATING CLAUSES OF LOAN AGREEMENTS'


  Course Information - introduction and background
 
Efficient financial system is the foundation of progress and prosperity. It is true for every entity, whether it is a developed country, a developing country, an industrial or a commercial organization or an individual. The efficient financial system involves two aspects – efficient management of the existing and available resources and the other is the augmentation of the required resources. The need for augmentation of resources is particularly more imminent when the available resources are limited, inadequate and insufficient. In the case of a country, the augmentation of resources can be done in several ways and from diverse sources. Such sources may be national or international. The domestic resources can subscribe to the generation of finances only up to a limited extent. They are generally not sufficient for the country’s proposed development and progress. Therefore, most of the developing countries have to depend on foreign sources of finance for successful implementation of their development plans and progress.

In the present world, various methods are available for raising foreign capital. They generally include aid, grants, bonds, private investments (equity or otherwise), etc. So far the most popular, convenient and easy method of obtaining foreign capital is through external borrowings. The document mostly adopted for borrowing money in the international world is loan agreement. The ability of a country to effectively draft and negotiate the terms and conditions of a loan agreement depends on numerous factors. It has vital bearing on the cost of borrowing and ability to repay. An ignorance of appropriate methodology, unbalanced terms of the loan agreement, and essential conditions of international borrowing has lead to frequent defaults in the repayment of the loan amounts. An effective team well versed with the skills and techniques of drafting and negotiating a loan agreement can make significant contribution towards lowering the cost of borrowing foreign money and easy repayment of loans. A small saving in each loan agreement can ultimately have a major impact on the debt management of the country.

The developing countries often presume, for a variety of reasons, that they have limited or no capacity to influence the outcome of negotiations of a loan agreement with an international lender. They often feel that international lenders generally do not subscribe to the viewpoint of borrowers or amend the clauses of the loan agreements. This is a serious misconception. Once the parties are committed to the negotiating process, the existence of convincing reasons, may be guided by national financial and economic considerations, for proposed amendments in the clauses of a loan agreement are difficult to ignore and often find acceptability with the lenders. The preparation and strategy of negotiation plays an important role in determining the outcome.

An effective and efficient team for negotiating a loan agreement consists of a multidisciplinary group of professionals with combined expertise in such disciplines, such as, finance, economics, law, accounting and negotiating skills. The lawyer’s contribution to this team is knowledge of domestic laws that govern the sovereign borrowing process, the laws and regulations relating to the lender and his lending process, the loan agreements generally deployed or adopted by the lender and other similarly situated lenders, and drafting issues that may arise in the negotiation and structuring of transactions.

Experience demonstrates that external borrowing units of developing countries often do not pay adequate attention to the legal issues involved in a loan agreement and their negotiations. First, there is a danger that they will authorize debt commitments that do not fully comply with all the requirements of domestic law. Second, they may fail to appreciate all the implications of the terms and conditions they accept in their loan agreements. Third, debt managers who do not have easy and regular access to expert legal advice are less likely to understand the legal issues that may arise in the course of their debt operations and to make effective use of whatever legal services may be available to them. In this regard it is important to recognize that the financial and legal terms of a debt transaction work together and can be coordinated to achieve better loan transactions for the borrower. All this has to be recognized from the drafting and pre-negotiation phase of a loan transaction.

     
Registration Status: OPEN
Deadline for Enrollment: when slots are full
Course Dates: November 1 to December 17, 2010
Estimated learning time: Minimum of 35 hours
Format: Online/Internet-based (asynchronous)
Language of Instruction: English
Fees: US $ 400/-
Helpline: UNITAR Geneva (Course Administration and Technical Questions)
 
  Course Objectives
 
The main objective of this Course is to create a greater awareness of importance of legal aspects in the international borrowing process including the pitfalls and safeguards. The Course aims at offering government officials, generally of borrowing countries, a broader understanding of numerous clauses normally incorporated in a loan agreement by different kinds of international lending institutions, the terminology used in such agreements having a bearing on repayment capacity of the loan, different methods of drafting such clauses by various international lending institutions, with the possible or likely interpretation thereof. In short, the aim of the present Course is to equip the prospective Borrowers with essential professional tools, to touch on a range of issues in a broad context, to help them in having a loan agreement for their country with reasonable terms. It will also set the turf for in-depth discussion and exchange of views between the legal negotiators.

  Intended Audience

This Course will concentrate on the mechanics of drafting and negotiating clauses of loan agreements. Therefore, it will aim at senior and middle-level government officials, lawyers and other members of the Attorney General's office responsible for drafting and negotiating or in any way involved in the preparation or approval of international loan agreements; officials of the Ministry of Justice and of such other Ministries who are in any way concerned with or responsible for international borrowing agreements; senior and middle level officials of the State Bank or the Central Bank who enter into international or domestic agreements which provide for the domestic and international borrowing; as well as all other debt and financial management institutions and industries undertaking external borrowing will be benefited from this Course. The Course will also be useful to the external aid and debt strategists, policy analysts, decision makers as sell as government lawyers involved in drafting and negotiating external loan/aid agreements.

Representatives from the Law Faculties of the Universities and members of the Judiciary who may be interested in the study of various provisions of national and international loan agreements and in knowing the purpose and intention behind various clauses of loan agreements.

Representatives of trade and industry who enter into international and domestic agreements;

It should be noted that this workshop is intended to invite a multidisciplinary mix of professions - including decision makers, policy makers, negotiators, economists, financial analysts, accountants as well as lawyers.

  Pedagogy
 


This course is designed as an online course in which participants will be primarily responsible for their own learning. Each lesson will consist of the following components:

1) Basic Reading Materials (Compulsory Reading Materials): these materials are intended to educate the participants about the basic concepts and principles applicable to the subject-matter of the lesson. It will include, where appropriate, sample materials. These materials will constitute the required reading materials for the lesson

2) Advanced Reading Materials (Optional Reading Materials): this will consist of optional reading materials for participants who wish to learn more about the topic than what is covered in the lesson.

3) External Links: This will refer the interested participants to additional books, articles, documents, and websites that deal with the issues raised in the lesson.

4) Glossary: A glossary of terms tailored to the online course will be provided to the participants and act as a learning support during the entire course.

5) Quizzes: At the end of each lesson there will be a set of quizzes for participants to answer. These quizzes are designed to test the participant's understanding of the lesson. Participants are required to pass each quiz and obtain at least 80% or more passing grade in order to be eligible for a certificate. All quizzes will need to be taken online.

6) Community Discussion Board: There will be a community discussion board available on which participants can post questions or comments that can be seen by the instructor and the other participants. This discussion board will be moderated by the course director and UNITAR. Structured discussion strings will be posted on a weekly basis.

All successful participants will be eligible to a certificate after completion of this online course.
 

Course Outline
 


Lesson 1: Methods of flow of foreign capital.

Lesson 2: Introduction to International Lending Agencies.

Lesson 3: World Bank Loan Agreements.

Lesson 4: Loan Agreements of Other Lenders.

Lesson 5: Conditions Precedent under a Loan Agreement.

Lesson 6: Financial Obligations - I.

Lesson 7: Financial Obligations - II.

Lesson 8: Financial Obligations - III.

Lesson 9: Covenants (Parts I and II)

Lesson 10: Representations and Warranties.

Lesson 11: Events of Default - I.

Lesson 12: Events of Default - II.

Lesson 13: Other Miscellaneous Provisions.

Lesson 14: Resolution of Disputes.

Lesson 15: Guarantee Agreements.

     
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