Development Finance & Security

• a developer negotiating acquisition or development finance
• an investor providing senior, mezzanine or shareholder funding
• a borrower combining bank debt with investor capital
• a landowner providing security or deferred consideration
• a lender financing a Portuguese project or project company
• or a developer preparing refinancing, unit releases or final repayment.

The legal review should begin at term-sheet stage, before the borrower accepts commercial terms that later determine:

• equity timing
• permitted project uses
• drawdown availability
• security and guarantees
• cost-overrun obligations
• change controls
• sales or leasing restrictions
• cash sweeps
• events of default
• and the lender’s enforcement position.

A term sheet may be stated to be non-binding while confidentiality, exclusivity, costs, governing law or other provisions remain binding.

Depending on the agreed engagement, support may include:

Term sheet and facility

• borrower, lender and guarantor structure
• facility amount and permitted purpose
• availability and maturity
• interest, default interest and fees
• mandatory and voluntary prepayment
• equity contribution and drawdown sequence
• cost-to-complete requirements
• financial and project covenants
• project accounts and payment controls
• sales, lease and disposal conditions
• information and reporting
• representations and undertakings
• events of default
• lender transfer rights
• and governing law and jurisdiction.

Pricing should be reviewed together with leverage, equity timing, fees, covenants, security, control rights and exit restrictions.

Security package

• mortgage over the property
• share or quota security
• security over project bank accounts
• assignment or security over receivables
• assignment or security over material project contracts
• insurance proceeds
• guarantees and indemnities
• powers, notices and acknowledgements
• registration and perfection
• ranking and priority
• and release mechanics.

A Portuguese mortgage is subject to applicable formalities and registration. Execution of the facility alone does not complete the mortgage-security process.

Guarantees and sponsor support

• shareholder or parent guarantees
• completion guarantees
• cost-overrun support
• interest shortfall support
• limited-recourse arrangements
• caps, expiry and release
• claim procedure
• and coordination with investor commitments.

The guaranteed obligations, maximum exposure, duration and release conditions should be explicit.

Intercreditor and subordination

• senior and mezzanine priority
• shareholder-loan subordination
• payment blocks
• standstill and enforcement rights
• turnover provisions
• permitted payments
• amendment restrictions
• and release on exit.

Shareholder debt should not be presented as lender-accepted equity unless the lender has expressly agreed its treatment and subordination.

Direct agreements and project documents

• contractor direct agreement
• professional-team direct agreements
• operator or asset-manager direct agreement
• assignment restrictions and consents
• lender step-in or cure rights
• continuity following borrower default
• and alignment of termination rights across project contracts.

Conditions precedent and drawdown

• corporate documents and approvals
• title and property documents
• planning status and urban titles
• valuation, survey and technical reports
• construction and consultant contracts
• insurance
• equity evidence
• security execution and registration
• legal opinions
• drawdown evidence
• compliance certificates
• and responsibility for each condition.

Every condition should identify the required evidence, responsible party, dependency and target date.

Construction, sales and operation controls

• approved budget and programme
• variations and cost overruns
• changes to the design, contractor or operator
• pre-sales and minimum prices
• unit or parcel releases
• permitted leases
• lender monitoring
• project income and cash waterfall
• distributions
• and repayment or refinancing.

• term-sheet legal issues list
• facility and security documents
• guarantees and subordination documents
• intercreditor agreement
• direct agreements
• corporate approvals and signing package
• conditions-precedent matrix
• drawdown and compliance checklist
• security-registration tracker
• unit-release or sales-proceeds protocol
• and repayment and security-release checklist.

• asset, project and borrower structure
• senior, bridge, mezzanine or other finance type
• loan-to-cost and loan-to-value policy
• planning and construction status
• lender jurisdiction and regulatory requirements
• contractor and operator arrangements
• investor commitments and guarantees
• pre-sales, leases or operating income
• and whether repayment comes from sales, refinancing, operation or disposal.

• It does not provide a binding credit decision.
• It does not guarantee satisfaction of conditions precedent.
• It does not replace the financial model, valuation or technical monitoring.
• It does not ensure that the project can fund overruns.
• It does not remove enforcement risk from security or guarantees.

The commercial model and legal documents should use the same costs, programme, areas, planning status, funding sources and exit assumptions.