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What is the certain funds provision?

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The certain funds provision obliges lead arrangers to provide certain funding to the borrower in order to complete the cash payment of an acquisition within a specified amount of time.  The certain funds period is typically 4-6 months from facility signing by the mandated arrangers.

Certain funds provisions are limited to certain material representations being true at transaction closing and provide that there can be no conditions precedent in the loan documentation to the close and funding of the facility, except as specified in a conditions annex.  The conditions to the certain funds are limited to customary procedural matters and completion of the acquisition.  All other representations and warranties in the agreement are made at closing.

Acquisition finance may also be subject to a financing out, which effectively incorporates into the acquisition agreement all the conditions precedent in the finance documentation.  A financing out is a condition precedent in a sale and purchase agreement (SPA) that makes the acquisition transaction subject to financing, where the acquirer is not required to complete the acquisition if the loan commitments do not fund.  Without it, acquirers may not sign the SPA before receiving assurance that the conditions precedent have been satisfied or are within its control and signing a facility agreement with certain funds.

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