Property finance: borrower fights 'tooth and nail' against refusal to allow full drawdown
By Brian Cain
This case is a good example of a borrower throwing everything but the kitchen sink at a lender only to find itself bound by the terms of the facility agreement because of some of the boilerplate provisions.
In 2007, Deutsche Bank (Suisse) entered into a £50m facility agreement with several members of the Khan family and several property-owning companies controlled by them. The properties stood as security for the loan, which was also guaranteed personally by one of the Khan family.
In the discussions between the bank and the borrowers prior to the signing of the facility agreement, it became clear from the valuations of the properties that a considerable element of the value attributed to them comprised ‘hope value’. The facility agreement was signed before full consideration had been given to the matter by the lender’s credit management department. Upon considering the valuation further, the lender decided it could not get comfortable with a drawdown by the borrowers of the full amount of the facility. A side agreement permitting partial drawdown was entered into…
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