1. Overview
The term “drawstop” colloquially refers to a provision in a credit facility agreement that entitles lenders to stop advancing loans under a facility upon the occurrence of certain specified events. For most deals, the relevant events would include a default continuing under the facility agreement and any “Repeating Representations” being inaccurate. The list of drawstops is often supplemented by deal-specific events and, in the context of fund finance transactions, various additional events that are explored in further detail below. Given the importance for borrowers of ensuring they have access to liquidity, drawstops are often the subject of intense negotiation.
For obvious reasons, drawstops are most important (and most heavily negotiated) when the facility can be utilised over an extended period of time, i.e. in the context of revolving credit…
