Interpretation of Material Adverse Change clause in loan agreement - .PDF file.
Material Adverse Change clauses are common in credit agreements, but are rarely interpreted by the courts. In Grupo Hotelero Urvasco SA v Carey Value Added SL (formerly Losan Hotels World Value Added I SL) & anr  EWHC 1039 (Comm) Blair J considers what can be taken into account when considering a borrower’s ‘financial condition’, how to assess the ‘materiality’ of any change in financial condition and to what extent a lender’s knowledge of pre-existing financial circumstances at the time of granting credit can be considered when assessing whether a material change has occurred.
This was a factually complex case involving the financing of a hotel and apartment development in London. The developers (a group of Spanish companies and an English-incorporated SPV) had two banking facilities: one provided by the group’s primary lender Banco Bilbao Vizcya Argentaria SA (the BBVA Credit Agreement) and a later facility that had been provided by a Spanish fund called Carey Value Added SL (Carey) when the developer was experiencing financial difficulties and sought further funding (Loan Agreement). One of the group companies had provided a guarantee. In 2008 Carey ceased to make advances under the Loan Agreement. The case is of interest for a number of reasons but this case note is limited to a consideration of the court’s interpretation of the relevant (and ‘plain vanilla’) Material Adverse Change clause…
If you are registered and logged in to the site, click on the link below to read the rest of the Allen & Overy briefing. If not, please register or sign in with your details below.