Economic pressure is and will continue to have an effect on projects, which raises the question, is it time for you to implement a Standstill Agreement or is it too late?
What is a Standstill Agreement
A Standstill Agreement is key in ensuring the longevity of a project in times of uncertainty. It is an agreement not to take specified enforcement action during a contractually agreed standstill period and may also apply to anticipated future defaults. The benefit of such an agreement includes the ability to stabilise the restructuring process, allowing time to develop a plan and can include (for example, and depending on specific circumstances) heightened information reporting, partial debt pay down, payment deferrals, processes and milestones for a sale, capital raise or refinancing and/or the provision additional credit support.
When should you arrange a Standstill Agreement
You do not have to wait until all circumstances are clear to start negotiating and finalising a Standstill Agreement. Agreements can be drafted simply having regard to the complexity of the capital structure and the number of creditors. If your project is likely to be detrimentally affected in the current environment, it may be time to pursue this option. Your first step will be to contact your legal advisor.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2020