The Book of Jargon - Project Finance - Latham & Watkins

1 JARGONP roject FinanceTheBOOKofThe Latham & Watkins glossary of Project Development, Acquisition and Finance Slang and TerminologySecond Edition 2 Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in the United Kingdom, France, Italy and Singapore and as affiliated partnerships conducting the practice in Hong Kong and Japan. Latham & Watkins practices in Saudi Arabia in association with the Law Office of Salman M.

2 Al-Sudairi. In Qatar, Latham & Watkins LLP is licensed by the Qatar Financial Centre Authority. Under New York s Code of Professional Responsibility, portions of this communication contain attorney advertising. Prior results do not guarantee a similar outcome. Results depend upon a variety of factors unique to each representation. Please direct all inquiries regarding our conduct under New York s Disciplinary Rules to Latham & Watkins LLP, 885 Third Avenue, New York, NY 10022-4834, Phone: + Copyright 2013 Latham & Watkins .

3 All Rights purpose of this publication is to assist the newest members of the Project Finance community in learning to talk the talk of Project Finance . It is intended to be a Berlitz Course for recent law school and business school graduates seeking initiation into the industry, and a desktop reference for not-so-recent graduates. In this book, you will find the key to the secret verbal handshakes that make up the code of the Project Finance love this PF Book of Jargon is one of a series of practice area-specific Books of Jargon published by Latham & Watkins .

4 Latham s first book in the series was The Corporate and Bank Finance Book of Jargon , from which we have liberally plagiarized, adapting many terms to the Project Finance context. Subsequent Books of Jargon have been published on European Capital Markets and Bank Finance and Global those who obsess about consistency ( , at least all of the lawyer readers), use of italics herein might seem to follow strange rules or no rules. Typically, terms from the book are italicized the first time they are used in a paragraph, other than their own paragraph.

5 Latham does not italicize very common terms or those that are self-explanatory (which we nevertheless do explain). Aside from that, there is always the stray true definitions contained in this book are designed to provide an introduction to the applicable terms. The included terms raise complex legal issues about which specific legal advice will be required. The terms are also subject to change as applicable laws and customary practice evolve. As a general matter, The Project Finance Book of Jargon is drafted from a US-practice information contained in this book should not be construed as legal you have suggestions for additional terms or expanded or clarified definitions for the current terms, please send an email to Resources.

6 Also known as contingent resources, these are those quantities of oil or gas estimated, as of a given date, to be potentially recoverable using established technology or technology under development, but that are not currently considered to be commercially recoverable due to one or more contingencies (note the difference here between contingent resources and Proven, Possible and Probable Reserves, where a market is more likely to exist). These contingencies may include factors such as economic, legal, environmental, political and regulatory matters, or a lack of markets.

7 It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities of oil or gas associated with a Project in the early evaluation stage. 1C Resources are classified as low estimate the lowest level of certainty for predicting the level of oil or gas resources. 2C Resources are classified as best estimate. 3C Resources are classified as high estimate, or the highest level of certainty for predicting the level of oil or gas Rep: Same as a Rule 10b-5 Endorsement: An Endorsement to Title Insurance for construction loans, issued at the time of borrowings that occur after the initial closing.

8 This endorsement does not date down or otherwise modify the effective date of the Title Insurance, but rather describes any additional encumbrances against the property, insures the Lenders that no other encumbrances have been recorded, and insures the priority of the Lender s existing liens and new advances over any subsequent encumbrances. Even though this Endorsement is sometimes called a datedown, it is distinguished from a Datedown Endorsement which changes the date of the policy to the date of the Sale: Named after a section of the Bankruptcy Code, an auction-like procedure for a bankrupt entity to sell assets, subject to approval by the judge.

9 Often there is a Stalking Horse Bidder who has already arranged to purchase the assets. If the Stalking Horse Bidder is outbid (which does happen), he gets a breakup fee for his : The end of the line under an Indenture or Credit Agreement. The definitions of Default and Event of Default describe how we get there. Following an Event of Default, the Bondholders (under an Indenture) or Lenders (under a Credit Agreement) have the right to accelerate the due date of their debts; in other words, they have the right to declare their Notes or loans immediately due and payable.

10 Bankruptcy and insolvency Events of Default usually automatically lead to Acceleration because otherwise Acceleration would be prohibited under the Automatic : The right to enter and exit a property from a public right of way (a road). Access rights will often require zoning approvals, curb cuts, easements or use agreements with adjoining landowners. A Title Insurance Policy may insure access with regard to an insured property if an Access Endorsement is included. If you do not have Access, you are landlocked and your property is worth very : A feature in a Credit Agreement that allows the Borrower to increase the maximum commitment amount under a Revolver or to incur additional term loan debt under circumstances specified in the Credit Agreement.