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This module focuses on the major international debt finance transactions entered into by investment banks, corporate borrowers and, increasingly, multi strategy private equity funds and other alternate private credit providers, often referred to as “the ‘shadow banking’ sector”, who play an active role in the critically important international debt capital markets developed in London, New York and Tokyo and, more recently, in Hong Kong, Singapore and Frankfurt. It is designed to provide an in depth understanding of the legal structures used in these transactions and the legal and regulatory issues that arise. The international debt finance transactions focused upon include: Bi-lateral and Syndicated Loans (including ‘investment grade’ and ‘leveraged’ loans) entered into in the Primary and Secondary Loan Markets; Bond Issues; Securitisation Transactions; Project Finance Transactions; and Derivative Transactions (primarily swaps).
Module syllabus
- Overview of the International Debt Capital Markets and current developments in the market
Since no prior knowledge of international finance law or the international debt capital markets is assumed, teaching commences with an overview of the form and contractual structure of debt instruments typically used to raise finance in the international debt finance markets, including the funding mechanisms used in those markets. The causes and potential implications of the relatively recent Global Credit Crisis and how the raising of the international debt finance has been affected by that crisis will also be examined as will the debate in respect of the recent LIBOR crisis (interest rate setting) and the replacement of that benchmark. We will also consider the significance of the changing nature of the lenders in the international finance markets, in particular, the increasing prominence of the “shadow banking sector” including debt funds established by multi strategy private equity platforms. Current developments, for example, the increasing importance of ESG (Environmental, Sustainability and Governance) in international debt finance will also be covered.
- International term loan agreements
The form and content of international (cross-border) term and revolving loan agreements including an analysis of the standard (Loan Market Association) form agreements typically used in the London based international finance markets in respect of both ‘Investment Grade’ and ‘Leveraged’ loans . We will focus, in particular, on the commercial objectives and legal effect of the key clauses included in such agreements including Conditions Precedent; Interest Rate and drawdown mechanics; Representations and Warranties; Covenants; and Events of Default.
- Syndicated loan agreements (primary loan market transactions)
The form and content of international syndicated loan agreements (multi-bank loans) and an analysis of the roles, obligations and potential liabilities of the various parties thereto including: the Arranger/Lead Manager; Agent Banks; Security Trustees; and Syndicate Lenders.
- Loan transfers (secondary loan market transactions)
How (and why) are loans regularly transferred in the secondary loan market? Additional considerations that arise in the context of non-performing loans (NPL’s); the methods of transfer typically used in the market: novation, assignment, sub-participation (risk and funded), proceeds assignment and transfers by way of trust. We will also consider the commercial and regulatory drivers for loan transfers; why liquidity in this market is important and how loan transfers are structured and documented.
- Project finance
This component will focus on the documentation typically used in project finance transactions and the risks (legal and commercial) such documentation is intended to address. Typical project financing structures will also be examined as will the roles of the various parties in such transactions.
- Securitisation and structured finance
This component will focus on classic “true sale” securitisation transactions including the commercial background and regulatory drivers that underpin the securitisation market. The structure of securitisation transactions will be examined in detail as will the role, rights and responsibilities of the various parties including: originators of securitisation transactions; ‘SPV’ styled issuers; arrangers; investors in securitised bonds; liquidity and credit enhancement providers, and third party service providers. We will also examine the documentation typically entered into to give effect to such transactions. The impact of the recent Global Credit Crisis and the Covid pandemic on securitisation transactions will be examined in detail, as will recent regulatory developments aimed at addressing some of the perceived weaknesses in the market. We will also examine the role of the international credit rating agencies.
- International bond issues
This component will examine the process of raising international debt finance via the issue of international bonds; the parties to such issues and the fundamental terms typically incorporated. The legal nature of international bonds will also be examined as will the manner in which they are traded. The role and duties of the bond trustee will also be examined in detail.
- Legal opinions
The role of the lawyer in international finance transactions; the form and content of legal opinions commonly delivered in international finance transactions and the potential liabilities for lawyers delivering such opinions.
Recommended materials
- McKnight, Paterson and Zakrzewski on ‘The Law of International Finance’ (2nd ed.) (2017), Oxford University Press.
Module reading lists and other module materials, including standard form documentation typically used in the international finance markets will be provided via online module pages, once students have made their module selections upon enrolment.
Preliminary reading
The following book provides a good introduction to the subject:
- Colin Paul & Gerald Montagu, Banking and Capital Markets Companion (Sixth Edition 2014), Bloomsbury
Key information
| Module details | |
|---|---|
| Credit value: | 45 credits (450 learning hours) |
| Convenor: | Graham Penn Professor of International Finance Law at UCL and partner at Sidley Austin LLP |
| Other Teachers: | TBD |
| Teaching Delivery: | Term One and Two Seminars |
| Who may enrol: | LLM Students Only |
| Prerequisites: | None |
| Must not be taken with: | None |
| Qualifying module for: | LLM in Corporate Law LLM in International Banking and Finance Law LLM in International Commerical Law |
| Assessment | |
| Practice Assessment: | TBD |
| Final Assessment: | 3 Hour Online Controlled Condition Exam (100%) |