MAC Clauses in Loan Agreements

Copenhagen and Frankfurt — Carsted Rosenberg Advokatfirma, a specialist law firm with core practices in banking and finance law, is pleased to announce the publication of "MAC Clauses in Loan Agreements: A Practical Guide under Danish Law", authored by Dr. Andreas Tamasauskas.

The guide provides a practical overview of material adverse change (MAC) clauses in committed loan agreements. A material adverse change clause (commonly referred to as a MAC clause, and sometimes as an MAE clause) is a contractual provision that entitles a lender to accelerate a loan, or to refuse further drawdowns, if an event occurs that has a material adverse effect on the borrower or its financial condition. MAC clauses appear in many types of commercial agreements, including share purchase agreements, capital markets transactions and, most commonly, committed loan agreements. This guide provides a practical overview of how MAC clauses operate in loan agreements, with particular reference to Danish law.

Key Takeaways

The guide addresses the following topics:

• The role of MAC clauses as a general protective mechanism for lenders in committed loan agreements, and the distinction between MAC and MAE clauses.

• The typical three-part structure of a MAC clause: triggering event, subjective or objective assessment, and material adverse effect.

• The distinction between "sole discretion" and "reasonable opinion" standards and their significance under Danish law, including the Danish Contracts Act (Aftaleloven) and the Danish Financial Business Act (Lov om finansiel virksomhed).

• How Material Adverse Effect is defined in LMA-standard documentation, including the three limbs (business impact, ability to perform, and security enforcement).

• The legal effects of a MAC event: acceleration, suspension of drawdowns and default interest.

• The difference between a MAC acceleration clause and a MAC representation, and why a well-drafted loan agreement should include both.

• The lender's limited alternatives where no MAC clause exists, including anticipated breach, failed assumptions and section 36 of the Danish Contracts Act.

• Instructive guidance from English case law, including BNP Paribas v. Yukos (2005), Grupo Hotelero Urvasco v. Carey Value Added (2013), Lombard North Central v. European Skyjets (2022) and BM Brazil v. Sibanye (2024).

• Lessons from the COVID-19 pandemic for MAC clause drafting and enforcement.

• Practical considerations for both lenders and borrowers in negotiating and invoking MAC clauses.

Consult Guide

Consult or download "MAC Clauses in Loan Agreements: A Practical Guide under Danish Law" from our website here. For further information, please consult our know-how section here and our legal updates in our news section.

MAC Clauses in Danish Loan Agreements Guide.pdf

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Carsted Rosenberg advises clients on a range of financing transactions, including syndicated lending, acquisition finance and structured finance. The law firm's expertise in the Danish and German financial markets enables it to guide both lenders and borrowers through the complexities of loan documentation.

Further Information

For more information on banking or capital markets transactions in Denmark, please contact Dr. Andreas Tamasauskas or Michael Carsted Rosenberg at Carsted Rosenberg.

This briefing is intended to provide general information on banking and finance law in Denmark. It is not intended to provide definitive legal or tax advice. No legal, tax or business decisions should be based solely on its content. The briefing does not necessarily deal with every important topic and is not designed to provide legal or other advice. It shall not be used as a substitute for legal advice and none may be inferred. It is only intended for general information on matters of interest. While we endeavour to represent the information as accurately and correctly as possible, we cannot accept any responsibility for any errors or omissions.