Draft Credit Agreement Markup

Skill: Borrower's Counsel Credit Agreement Markup Memo (LBO Financing)

1. Subject-matter triage (only if applicable)

• Treat the draft credit agreement as the primary work product and the memo as a secondary advisory attachment.
• First confirm the operative source set: executed term sheet, commitment letter, partner instructions, and the draft agreement.
• If the source materials address multiple tranches, baskets, currencies, maturity paths, or borrower entities, enumerate them before analysis and review each separately.
• If only one facility or one borrower group is in scope, state that explicitly and proceed on that basis.

2. Failure modes the skill is correcting

• Failing to cross-check each financial covenant level against the operative financing summary materials; even small numeric differences can create a more restrictive covenant than intended.
• Missing the absence of a replacement lender or comparable transfer mechanism, which is a common borrower protection against holdout lenders blocking amendments or waivers.
• Stating restricted payment basket components imprecisely, without separating any fixed-capacity and ratio-based components that both need to be checked.
• Specifying the equity cure rolling cap without stating both the per-period dimension and the lifetime dimension.
• Collapsing distinct deviations into a generic “market” comment instead of isolating each operative difference, its source, and its consequence.
• Marking issues narratively without a durable plain-text redline convention that survives export.

3. Legal frameworks / domain conventions that apply

• Compare the draft credit agreement against the operative financing summary materials provision by provision; the deal documents control commercial intent, and the markup should reflect that hierarchy.
• Financial covenant levels must be checked line by line against the agreed summary; any divergence should be treated as a borrower-side point requiring explicit confirmation or correction.
• Borrower-transfer protection should be verified for a workable replacement lender or transfer-out mechanism where a lender refuses a routine amendment, waiver, or consent.
• Restricted payment capacity should be parsed by component, including any fixed basket, ratio basket, builder basket, carve-outs, and carryforward logic.
• Equity cure mechanics should be checked for both frequency and lifetime constraints, including any rolling-window formulation.
• Defined terms, basket mechanics, lien permissions, debt incurrence, investments, junior debt, prepayment rights, mandatory prepayments, and amendment mechanics should be checked for internal cross-references and consistency.
• For any proposition presented as controlling, cite the governing source in the work product by name or section where available; do not state a conclusion without tying it to the operative document language or a recognized drafting convention.

4. Analytical scaffolds

1. Build an issue inventory by provision family, not by document order.
2. For each provision family, compare:
   • the operative financing summary language,
   • the draft agreement language,
   • the borrower-side proposed correction.
3. For each issue, capture:
   • the precise deviation,
   • the source of the intended position,
   • the practical effect on borrower economics, flexibility, or risk.
4. Assign every issue a severity level from a stated ordinal scale:
   • Critical: must be corrected before execution or borrower economics/control are materially impaired.
   • High: likely inconsistent with the agreed deal or materially borrower-unfriendly.
   • Medium: drafting mismatch, missing clarification, or scope ambiguity with limited immediate impact.
   • Low: cleanup, consistency, or style point.
5. Close each issue with three elements:
   • the scale of the deviation as reflected in the source materials,
   • the related provision or document that interacts with it,
   • the downstream consequence for the borrower.
6. Where a term appears in multiple places, trace the cross-reference chain and confirm the defined term is used consistently everywhere it matters.
7. Where the draft is silent on a borrower-protective concept, propose affirmative replacement language rather than only noting the absence.
8. For redlines, use text that remains readable outside formatting:
   • [DELETED: …]
   • [INSERTED: …]
   • [REPLACED: old → new]
   • add a short [Rationale: …] note for each substantive change.

5. Vertical / structural / temporal relationships (only if applicable)

• Check whether a covenant, basket, or cure right applies at signing, at closing, upon a leverage test date, or only after a specified delivery trigger.
• Verify whether temporal windows roll forward, reset, or accumulate; do not assume a one-time cap where the draft uses a rolling concept.
• If a mechanic references a historical period, confirm the period length, measurement date, and any lifetime ceiling are all stated.
• If a provision depends on another document, schedule, or definition, trace that dependency and ensure the dependency is not broken by a draft change.
• If multiple borrower or guarantor tiers exist, confirm the obligation applies at the correct vertical level and does not inadvertently capture a narrower or broader set than intended.

6. Output structure conventions

• Produce a borrower-side markup memo organized by issue family with a short executive summary up front.
• State the severity scale once, then apply it uniformly to every issue.
• For each issue, include:
  • issue title,
  • severity,
  • operative source position,
  • draft agreement position,
  • proposed redline,
  • concise rationale,
  • borrower consequence.
• Use explicit plain-text redline markup for every substantive change so the result is intelligible without track changes.
• Where an issue turns on a comparison to a specific source clause, cite that source in the memo.
• End with a Recommended Actions block that assigns the next step to counsel or the appropriate business contact and ties it to the signing or execution timeline.
• Before finishing, confirm the memo is complete, internally consistent, and ready to be exported as credit-agreement-markup-memo.docx.