Clifford Chance

The Euro Crisis: Implications For Loan Agreements

9 April 2012

However challenging the Great Recession has been in the United States, it has ravaged the economies of several of the countries that use the euro as their common currency(the Eurozone).1 Notwithstanding Greece’s bond restructuring last month, the possibility remains that one or more countries (a Departing Country) might cease using the euro by leaving the Economic and Monetary Union (EMU) and the European Union (EU). Although projecting how a Eurozone member’s departure might occur is difficult, the potential implications of such an event on existing and new credit facilities have been discussed extensively in Europe in relation to the Loan Market Association’s standard loan documentation. 

The topic, however, has received little coverage in the United States. Today, we examine several issues lenders may face under New York law-governed credit facilities that include eurodenominated tranches to borrowers organized or located in a Departing Country, as well as relevant protective measures lenders may wish to consider when underwriting new or, where feasible, amending existing loan arrangements.

This article was published on 5 April 2012, New York Law Journal - Corporate Update (Volume 247—NO. 65)

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