Direct Agreement Step-In Rights

Is it possible to provide security through cash flows/contract rights (including future rights such as those that crystallize) / project bank accounts? Project lenders generally take responsibility for the security of all project company rights as part of the main project documents as part of the security package (see practical note: security in project financing operations). The World Bank coordinated efforts to establish a set of standards for assessing the rights of insolvency and creditors` rights (“ROI”), in line with the World Bank and IMF`s Standards and Codes Initiative. This information, along with other relevant information on creditors` rights and bankruptcies, can be found in the World Bank`s database of global insolvency legislation, based on principles and guidelines. To make it a “standard” step, a bankruptcy administrator (most likely a director or sponsor if the situation falls within one of the exclusions from the general ban on their appointment) may be instructed by the lender to start. This may reduce some of the risks mentioned above for a lender, including the risk of a direct claim on the lender for an infringement resulting from its own actions after cashing in and the risk of disruptions caused by other parties who take their own insolvency measures from judicial administrators. It may also open up other options for the lender, including an exit through the sale of the project or development to a third party or the acquisition of the project or development by the lender or its nominee, via a credit offer transaction. It is important to note that this is a right and not an obligation. For example, the funder is not automatically responsible for the sums liabilited by the developer, it usually only enters its position and therefore accepts its rights and obligations when it issues a notice of intervention. If the entrance fees are included in third-party fees (which can only be rights and not obligations), they must be conditional on the acceptance of the obligations associated with them.

Intervention rights are rights granted to lenders under project-financed agreements to “penetrate” the project company`s position in the contract, in order to take control of the infrastructure project in which the project company is not active.

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