ACIC Swap Indemnity Letter Form (Final April 18 2019)

Swap Indemnity Letter:

 

  1. The TPMC has agreed to add that the currency swap that the Noteholders will be entering into will be on an arm’s length basis.  This is consistent with the language in the definition of “Original Swap Agreement” in the Model Form Make-Whole and Swap Breakage Indemnity.

 

  1. In addition to the existing carve out from the swap indemnity where a Purchaser is unwilling or unable to close on the scheduled closing date despite the Issuer meeting the conditions, the TPMC has also agreed to add an additional carve out to the effect that the transaction does not close on the scheduled closing date due to “the failure to fulfil such conditions precedent directly as a result of such Purchaser’s wilful misconduct, bad faith or breach of the terms of the Note Purchase Agreement”.

 

  1. In addition to the swap indemnity covering the cases where the scheduled closing date is cancelled or delayed, the TPMC has also added to the indemnity the case where “there are any changes between the date [of the swap indemnity letter] and the Contemplated Closing Date to the payment terms (including any scheduled payments under the swapped notes) or other information reflected in the Swap as disclosed to [the Issuer]”.

 

  1. Finally, one of the bigger points in these swap indemnity letters that have been negotiated in most transactions is whether the Purchasers should be handing over any net gain from a terminated swap resulting from the Issuer cancelling or delaying the scheduled funding/closing.   After long debate, the TPMC has agreed to provide for Purchasers handing over a net gain only in the cases where the scheduled funding/closing does not occur as a result of “the conditions precedent set out in the Note Purchase Agreement not being met directly as a result of any Purchaser’s wilful misconduct, bad faith or breach of the terms of the Note Purchase Agreement”.   The insurance institutions expect that the responsibility for the closing conditions being satisfied best sits with the Issuer and it is the one in control of those conditions being met (not the Purchasers).  Accordingly, the Issuer should be taking the risk associated with those conditions not being satisfied, not the Purchasers.  However, in the case where any Purchaser causes the cancellation or delay of the scheduled funding/closing then the Purchasers should be handing over any net gain.
State: 
Final