This is a cashless loan (PIK), which is not a very typical financing agreement in the Egyptian market and is exceptionally used in cross-border transactions, especially if these transactions are removal agreements in the oil and gas sector. Another basic principle of creditor agreements is that the principal creditor generally has the right to control the maintenance and sale of joint security, while the subordinate creditor must waive certain legal rights that would otherwise give it the right to challenge the enforcement proceedings. Typically, a ”standstill period” is imposed, which gives the principal creditor the exclusive right to seek and seek remedies against the debtor for a certain period of time. The number of downtime allowed during the term of the loan is usually the subject of negotiations between senior and subordinated creditors. Each standstill period is typically 90 to 180 days during the term of the loan, with additional time extensions as long as enforcement measures are carefully pursued. In order to speed up and streamline the realisation of the guarantee, the granting of exclusivity to the principal creditor may be subject to certain conditions, such as.B. the obligation for the principal creditor to select and use the services of an independent appraiser qualified for the valuation of the guarantee or an experienced investment banker to carry out an auction process for the efficient sale of the guarantee. The same conditions may apply to the subordinated creditor if it resumes proceedings after the expiry of the standstill period for unrealized joint security rights. The second secured creditor generally reserves only the right to make a claim and to demand and expedite its loans in order to preserve its status as (or at least not worse than) all unsecured claimants.
Whether the second secured creditor is granted the right to approve the provision of common security in insolvency proceedings is generally the subject of heated debate. A comprehensive inter-creditor agreement that sufficiently clarifies the process of enforcement of the security and the appropriate restrictions on the rights of the principal creditor is often sufficient to keep the subordinate creditor in the herd. The definition of privilege priority between two secured creditors is necessary if both have security rights in the same security right. The reason for this is that when performing the lien, the lead lender will first try to be reimbursed from the proceeds of the guarantee, while the subordinated lender expects to collect only the remaining proceeds. If the proceeds of the guarantee are insufficient to repay the principal lender in full, secured creditors and all other unsecured creditors would be entitled to repay the remaining debts of the debtor`s other assets. Payment subordination agreements in the inter-creditor contract mitigate this result in favour of the principal creditor. Subordination of payment allows the principal creditor to have the right to be paid first on all assets of the debtor or another debtor of the debtor, whether or not those assets constitute collateral. The amount due to the principal lender determines the terms of payment, not the value of the pledged collateral. The provisions of the inter-creditor agreement generally require all parties to pay all proceeds of the common security to the principal creditor or its representative.
The fundamental function of a creditor agreement is to regulate the communication and actions of lenders, such as enforcement and decision-making. The size and complexity of an inter-creditor contract depends on the underlying transaction, in particular the nature and categories of lenders, the nature and location of the title and the legal regime of that title, as well as the roles of the different banks (onshore and/or offshore security officer, onshore and/or offshore account bank, etc.). A goodwill mortgage can now be developed for the benefit of foreign banks and international financial institutions, provided that the credit/loan facility used is used in Egypt and that the ECB`s prior approval under the EPC Law has been obtained and perfected in an agreement whereby all of the debtor`s transactions as tangible and intangible assets (including rights of hereditary constructions, b. trade name, goodwill, Machinery and equipment, etc.) be promised for the benefit of the security guard. In most cases, hedging counterparties will be parties to the inter-creditor arrangement where their fees will most likely be treated as part of the senior debt, against certain obligations imposed on hedging counterparties, as well as the voting mechanisms applied in some cases and the distribution of the proceeds of execution. All these elements vary for each transaction in accordance with the terms agreed between all related parties. In order to assert a lien of actions, the secured creditor must first demand payment of the secured debt of the pledge, usually by serving an official notice by a bailiff. If the pledger does not make the payment within ten days of notification, it may assert its rights to the shares in accordance with the rules of sale and purchase of the Egyptian Stock Exchange (EGX). The above procedure applies only to Egyptian banks and branches of foreign banks registered with the EPC and authorised by the EPC in accordance with Article 107 of the Banking Law, while the procedure applicable to other privileges (i.e. foreign banks) is different, since enforcement must be carried out by public auction and by an enforcement judge, unless: this privilege has been perfected in accordance with the recently adopted amendments to the RCDM; in such a case, if clearly stated in the agreement, the pledged person would have the right, in certain cases, to appropriate the pledged shares ….