As mentioned in the first part of this article (published in the July/August 2017 issue), stakeholders in Colombian project financings are taking certain measures to mitigate risks derived from potential corruption cases. As part of those measures, lenders are giving special attention to improving contractual structures through more sophisticated anti-corruption clauses. This course of action is affecting not only financing documents in negotiation stages, but also some agreements already executed.
The new clauses address corruption issues in the definitions, representations and warranties, covenants and events of default sections. The following are some examples of the most relevant changes that are being negotiated in the context of 4G project financings.
Regarding the definitions section, lenders are including a more comprehensive definition of anti-corruption laws, using catch-all language to cover all laws of any jurisdiction concerning or relating to bribery or corruption.
In the representations and warranties section, lenders require that borrowers declare that they, along with their affiliates, corresponding subsidiaries, directors, officers and employees, are complying with anti-corruption laws. Another new approach establishes that no sponsor or any of its affiliates, nor any director, officer or employee of any such sponsor or affiliate has acted or omitted to act in any manner or taken any action that could reasonably be expected to result in an early termination of the relevant concession agreement or in the concession agreement being declared null and void.
As regards covenants, lenders require borrowers to maintain in effect and enforce the policies and procedures that have been designed to promote and achieve compliance by all borrowers in line with applicable anti-corruption laws. These lenders' requirements apply not only to the borrower but also to its subsidiaries, respective directors, officers and employees, and any person with whom it enters into an agreement or contract in connection with the development of the project.
Finally, lenders are amending 'event of default' sections to make cross references to new representations and warranties and covenants included in the loan agreements. This also allows them to create cross defaults if any other project party breaches its corresponding obligations or misrepresents any declaration included in any other transaction document. For example, a misrepresentation of a sponsor in the equity contribution agreement (even related to one of its employees) could lead to the acceleration of the loans.
All of these new clauses should improve the compliance environment in Colombia, especially welcome considering the country's ambitious concession programme that is under development. The challenge is to avoid negatively affecting healthy projects by causing reputational damage to lenders and other stakeholders involved. Lenders have the huge responsibility of using these new powers wisely.