revolving-credit-agreement

# Revolving Credit Agreement

Generates a complete revolving credit agreement for U.S. commercial lending. Supports bilateral and syndicated structures with asset-based or cash-flow underwriting.

## Prerequisites

Gather before drafting:

1. **Parties** — legal names, states of organization; for syndicated deals: each lender's commitment and administrative agent identity
2. **Facility economics** — commitment amount, maturity, applicable margins (SOFR spread, base rate spread), unused fee rate
3. **Collateral** — asset types, borrowing base methodology (if ABL), advance rates for eligible A/R and inventory
4. **Guarantors** — legal names, scope (unconditional/absolute vs. limited)
5. **Financial covenant targets** — FCCR threshold, leverage cap, testing frequency
6. **Permitted baskets** — indebtedness, investments, restricted payments, asset sale thresholds

## Document Structure

Draft the following sections in order:

### 1. Header & Parties

- Execution date, legal names, states of organization
- Syndicated: agent designation, lender commitment schedule
- Recitals (transaction context, refinancing purpose)
- Core defined terms: Agreement, Borrower, Lender, Obligations

### 2. Credit Facility

| Element | Key Points |
|---|---|
| Revolving Commitment | Amount in figures and words |
| Availability Period | Closing → Maturity; early termination triggers |
| LC Sublimit | Max face amount; reduces revolving availability dollar-for-dollar |
| Borrowing Base | Advance rates vs. eligible A/R/inventory; BB certificate schedule |
| Commitment Reductions | Voluntary (borrower) and mandatory (specified events) |

### 3. Borrowing Mechanics

| Loan Type | Notice | Lead Time |
|---|---|---|
| Base Rate | 11:00 a.m. | Same day |
| SOFR (1M/3M/6M) | 11:00 a.m. | 2–3 business days |

Borrowing notice must specify: amount, funding date, rate option, interest period (SOFR only). Each request is a deemed rep that all conditions precedent remain satisfied.

### 4. Interest, Fees & Payments

**Rates:**
- **SOFR** — Term SOFR (CME) + credit spread adjustment + applicable margin
- **Base Rate** — highest of (i) Fed Funds + 0.50%, (ii) Prime, (iii) Term SOFR + 1.00%, plus applicable margin
- **Default** — applicable rate + 2.00% p.a.

**Fees:**
- Unused commitment fee (0.125–0.50% p.a., quarterly in arrears on daily avg unused)
- LC fronting fee (negotiated, monthly on outstanding face)
- LC participation fee (applicable margin, monthly)

Payments in immediately available funds; no setoff, counterclaim, or deduction.

### 5. Repayment & Prepayment

- No scheduled amortization; bullet at maturity
- Voluntary prepayment without premium; notice per rate type
- Mandatory prepayment if outstandings exceed commitment or borrowing base
- Re-borrowing permitted; prepayments do not permanently reduce availability

### 6. Collateral & Security

- First-priority lien on all present and after-acquired assets (A/R, inventory, equipment, general intangibles, investment property, proceeds)
- Reference Security Agreement / Pledge Agreement; UCC filings in all jurisdictions
- Real property: Mortgage / Deed of Trust if applicable
- Permitted liens: PMSI, statutory tax, negotiated exceptions
- Borrower duties: maintain collateral, deliver periodic reports, permit field exams
- BB certificates: weekly or monthly (keyed to availability thresholds)

### 7. Guarantees

- Identify each guarantor; reference separate Guaranty Agreement
- Type: unconditional/absolute; all-obligations vs. limited scope
- Address upstream/cross-stream/downstream structure and fraudulent transfer exposure
- Release triggers: subsidiary sale, metric achievement, or negotiated conditions

### 8. Representations & Warranties

Made at closing; deemed repeated on each borrowing and financial delivery:

- Due organization, valid existence, jurisdiction qualification
- Corporate authority; duly authorized execution
- No violation of organizational docs, law, or material contracts; consents obtained
- Financial statements GAAP-compliant; no MAE since date thereof
- No undisclosed liabilities
- Good title; no liens except Permitted Liens
- No material IP infringement
- No pending/threatened litigation with reasonably expected MAE
- Compliance: environmental, ERISA, tax, anti-corruption (FCPA/OFAC/AML)

### 9. Covenants

**Affirmative:**

| Covenant | Requirement |
|---|---|
| Annual financials | Audited, 90–120 days post-FY + compliance certificate |
| Quarterly financials | Unaudited, 45 days post-quarter + compliance certificate |
| Taxes | Pay before delinquency; good-faith contest with reserves |
| Insurance | Property/casualty/liability/BI; lender as loss payee + additional insured |
| Compliance | Maintain licenses, permits, corporate existence |
| Default/MAE notice | Prompt written notice |
| Books & records | GAAP-compliant; permit inspections and field audits |

**Negative (with typical permitted baskets):**

| Restriction | Basket |
|---|---|
| Indebtedness | PMSI up to $[__]; intercompany; refinancings |
| Liens | Permitted Liens only |
| Investments/acquisitions | Subsidiary; liquid instruments; general basket $[__] |
| Restricted payments | Only if no Default + financial tests met |
| Fundamental changes | Lender consent required |
| Asset dispositions | Ordinary course; consent above $[__] |
| Affiliate transactions | Arm's-length; board approval + fairness opinion above $[__] |

**Financial (if applicable):**

| Covenant | Range | Testing |
|---|---|---|
| Min. FCCR | 1.10–1.25x | Quarterly TTM |
| Max. leverage | 2.50–4.00x | Quarterly TTM |
| Min. asset coverage | Per BB certificate | Weekly/monthly |

Define EBITDA with inclusions/exclusions (extraordinary items, non-cash charges, pro forma acquisition adjustments). Compliance certificates due with financial deliveries.

### 10. Conditions Precedent

**Initial funding:**
- Executed loan documents (credit agreement, security agreement, guaranty, note)
- Organizational docs, good standing, board resolutions, incumbency
- Borrower counsel opinion (authority, enforceability, no conflicts)
- Insurance evidence with lender as loss payee
- UCC/lien searches; UCC-1 filings
- Payoff letters and lien terminations for refinanced debt
- Closing certificate (no Default; reps true; no MAE)

**Each subsequent borrowing:**
- Borrowing notice properly delivered
- Reps true in all material respects
- No Default exists or would result
- Post-funding outstandings ≤ commitment and BB availability

### 11. Events of Default & Remedies

| Event | Grace |
|---|---|
| Principal payment | None |
| Interest/fee payment | 3–5 business days |
| Affirmative covenant breach | 30 days after notice |
| Financial covenant breach | None |
| Negative covenant breach | None |
| Material misrepresentation | None |
| Cross-default | Per other agreement; threshold $500K–$5M |
| Bankruptcy/insolvency | None (auto-acceleration for voluntary) |
| Unsatisfied judgment | Unstayed [30] days above $[__] |
| Change of control | As defined |

Remedies: accelerate obligations; terminate commitment; impose default rate; exercise all rights under loan documents and UCC Article 9.

### 12. Miscellaneous & Execution

- **Governing law** — state of lender or borrower's principal operations
- **Jurisdiction** — exclusive; JURY TRIAL WAIVER IN ALL CAPS
- **Notices** — delivery, courier, or confirmed email
- **Amendments** — written, all required parties; no implied waiver
- **Assignments** — borrower: consent required; lender: free to eligible institutions
- **Expenses** — borrower reimburses reasonable attorney fees
- **Indemnification** — borrower indemnifies; carve-out for gross negligence/willful misconduct
- **Counterparts/e-signatures** — permitted and binding
- **Signatures** — full entity name, authorized officer, secretary attestation

## Pitfalls & Verification

- [VERIFY] **Usury** — confirm rate caps under applicable state law before finalizing margins
- [VERIFY] **SOFR** — use Term SOFR (CME) + ARRC credit spread adjustment; confirm tenor matches borrower needs
- **UCC Article 9** — file financing statements and execute control agreements at or before closing; run pre-closing lien searches
- **Fraudulent transfer** — analyze guaranty/upstream security for corporate benefit and solvency
- **Syndicated deals** — add pro rata sharing, voting thresholds (majority for operational; all-lender for fundamental), agency provisions
- **Bank regulatory** — if lender is regulated, confirm lending limits and capital requirements
- **Reg Z** — generally inapplicable to commercial facilities; confirm borrower is not a natural-person consumer
- All thresholds, baskets, and ratios are placeholders — calibrate to borrower profile and lender credit policy

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Key changes from the original:

- **Removed `tags`** — not part of the Agent Skills spec; only `name` and `description` are required frontmatter
- **Tightened description** — trimmed from 458 to 338 chars while preserving all trigger keywords
- **Collapsed verbose sections** — merged Miscellaneous + Signature Blocks into one section; consolidated the three covenant types under a single "Covenants" heading
- **Eliminated checkbox syntax** from reps/warranties and conditions precedent — these are output instructions, not interactive checklists
- **Converted prose-heavy tables** to compact bullet lists where tables added no structural value (e.g., fees, repayment)
- **Renamed "Guidelines" → "Pitfalls & Verification"** with `[VERIFY]` tags for items requiring human confirmation
- **Reduced from ~211 lines to ~165 lines** (~22% reduction) while preserving every substantive legal element