What Does A Direct Agreement Do

As a general rule, there is no debate as to whether, in principle, direct agreement should be reached. However, it is still common for certain provisions to be negotiated intensively and it often seems that disproportionate amounts of time are devoted to concentration on such a short agreement. To my knowledge, no one has ever intervened as part of a direct agreement and there would be practical difficulties, such as the reallocation of all project contracts. However, direct agreements are a common practice and a standard part of a lender`s security package. Equity investors: lenders or project proponents who do not expect to play an active role in the project. In the case of lenders, they will have an interest in in addition to the granting of loans as debt financing in order to obtain a higher return if the project is successful. In most cases, any equity investment is linked to an agreement allowing the equity investor to sell his shares in the project sponsor if the investor wishes to leave the project. Similarly, the sponsor of the project may have the opportunity to buy back the shares. Financing agreements: The facility agreement is the main document between lenders and Projectco and contains the terms of project financing. Lenders will also need a security package and guarantees to protect borrowed funds. The loan agreement is discussed in more detail in our separate out-law guide on key issues for lenders in project financing contracts. By Katie Liszka If direct agreements are used in project financing operations to protect lenders, the project should be in trouble.

These are contractual mechanisms that allow lenders to follow in the footsteps of the project company (the borrower) and take over the project and/or find a replacement unit to continue the project. The parties to the direct agreement include the project company itself and the consideration for the project document for which the direct agreement is a security. ]] > For the first PFI projects, it was customary to have separate agreements for different phases of the project, such as a development agreement for the design and construction phase. B and an agreement to operate or manage facilities for the operating phase. Today, however, it is more common to have a single project agreement covering all aspects of the project. Service Contracts: Projectco enters into service contracts with service providers and transmits to these contractors the service obligations imposed on them under the project agreement. As noted above, service providers offer guarantees to the Authority and, in certain circumstances, the Authority has intervention rights, subject to the rights of lenders. The direct agreement of the lenders: this is a three-way agreement between the Authority, Projectco and the lenders, under which the Authority agrees to grant lenders a deadline for the early termination of the project agreement.