Unusual 'Mac' clause saves TPG
|
| Underwriters can't throw their toys out too often |
TPG Capital's withdrawal from buying a stake in Bradford & Bingley relied on a specifically drafted termination clause. Its targeted nature demonstrates how these clauses are being used as specific break-up weapons.
"When you get specific with Macs (material adverse change clauses), it is easier to see where the trigger point is," said a partner close to the deal. "Here, TPG could walk away if Bradford & Bingley's credit rating fell by two notches. Everyone could see when that had happened and there was no debate – TPG was free to go."
The clause in question was technically a specific termination event, not a Mac. Both types of clause are usually drafted next to each other in contracts which is why termination clauses are often called Macs when they are not.
TPG entered negotiations with Bradford & Bingley...