LPC

Study Unit Specifications (Elective Subjects)

Code: UJXTS5-10-M

Title: Banking and Capital Markets

Version: 2

Level: M-level

UWE credit rating: 10

ECTS credit rating: 5 Module Type: Non-MAR

Owning Faculty: Social Sciences and Humanities

Field: n/a Field Leader: n/a

Valid From: September 2008 Discontinued from:

Contributes towards: Postgraduate Diploma in Legal Practice

Pre-requisites: none

Co-requisites: none

Excluded combinations: none

1. Rationale:

As with all study units on the programme, the rationale is to prepare the student for the first day of work as a professional lawyer (i.e. as a new trainee solicitor in a firm of solicitors). Specifically in this case, the rationale is to prepare the student for work in a large firm of city solicitors.

2. Learning outcomes:

On completion of the module students are expected to be able to (at a professional level):

2.1 understand and critically evaluate the different ways of raising debt finance and the types of facilities most appropriate to the borrower’s requirements

2.2 appreciate and understand the commercial and legal criteria that underlie a debt financing transaction (be it a loan or a debt securities issue) and influence the structure of the transaction;

2.3 understand how different transactions are carried out in practice (in particular:

      - the major factors that effect the timetable and the main contractual documentation; and

    - some of the most common areas of contention between parties in relation to drafting and negotiating the contractual documentation); and

2.4 recognise the responsibilities of the advisors in the different transactions including

the legal advisors (including, where appropriate, the role of a trainee or assistant solicitor in a team of legal advisors), including in respect of due diligence, preparation for and implementation of signing of documents and the closing of transactions; and

2.5 use research and enquiry techniques to access, interpret, critically analyse and apply relevant knowledge.

3. Syllabus outline:

This study unit introduces the student to the main types of debt financing transactions in the UK and the factors which influence the choice of debt transaction. The study unit identifies and explains the role of the professional advisors in debt transactions and how such transactions are carried into effect in practice. In particular, students will consider:

      (i) Major sources of debt finance

          - bank loans

          - debt securities issued in the capital markets

      (ii) Loans

          - capital adequacy constraints for lending banks

        - difference between:

          - term and revolving credit facilities; and

          - bilateral and syndicated lending

        - significance of:

          - committed and uncommitted facilities; and

          - recourse and non-recourse lending

        - structure and content of:

          - timetable; and

          - term sheet

- loan agreement

        - emphasis on major elements:

          - interest basis;

          - representations and warranties;

          - covenants;

          - default;

          - syndication provisions

          - jurisdiction

          - disclosures

          - secondary debt – novation or assignment of lender’s interest

          - roles of lawyer for lender and for borrower

          - fact gathering, legal review, due diligence and analysis

          - drafting and negotiating

          - conflicts of law where borrower or security provider not incorporated within English jurisdiction

          - jurisdiction, governing law, waiver of sovereign immunity

          - legal opinions

      (iii) Secured Lending

          - purpose and nature of security

          - different types of security and quasi-security

          - loans that are usually made on secured basis – land, aircraft, ships

          - quasi security

          - guarantees and comfort letters (distinguished)

          - priorities, registration of charges, crystallisation, corporate benefit, financial assistance.

      (iv) Capital Markets

          Outline of:

          - euromarkets

          - different debt instruments

          - bonds, commercial paper, medium term notes, certificates of deposit and acceptance credits

          - the structure of an issue

          - parties

          - timetable

          - documentation

          - legal nature of different instruments

          - significant terms of relevant issue documents

          - listing requirements and listing particulars liability

          - role of lawyers for issuer, manager and trustee

          - drafting and negotiating

          - information gathering, due diligence, legal review and analysis

4. Teaching & learning methods:

- reflective questions to consolidate student learning in pre-workshop activity at the beginning of each session;

- use of practical factual scenarios to practice individual drafting skills– in workshop 1, students are involved in drafting the interest clause and a negative pledge using a precedent loan agreement. In workshop 2, the students have the opportunity to review and comment upon a draft legal opinion. In workshop 3, students draft a default clause and the jurisdiction provisions for a loan agreement. In workshop 5, the students are involved in drafting board minutes. In workshop 6, students draft a short form guarantee and comfort letter.

- use of practical factual scenarios to practice individual writing skills – in workshop 4, students are asked to compose an email to a banking partner. Students have the opportunity of writing a letter of advice to a banking client in workshops 4, 8 and 9. In workshop 5 students have the opportunity of discussing how they would tackle a letter of advice with a course colleague. In workshop 6, students are asked to write a memorandum to a colleague explaining the differences between a guarantee and a comfort letter.

- use of practical factual scenarios to practice the skill of negotiation – in workshop 6, the students negotiate the security package to be provided either from a lender or a borrower perspective based on a series of confidential briefings;

- small group work to analyse the terms of standard clearing bank debenture and guarantee, advising a hypothetical client as to the implications of entering into a debenture/guarantee and plenary group feedback.

- Small group discussion to consider the relative advantages of loans and bonds as a method of fundraising – and feedback as student presentations;

- plenary group discussions of workshop activities to reinforce and consolidate learning

5. Indicative sources:

- Paul, C and Montagu, G “Banking and Capital Markets Companion”, Tottel

    2008.

- statutory sources include the Banking Act 1987, Financial Services and Markets Act 2000

- regulatory sources include FSA regulations and the Securities and Exchange Commission’s (SEC) 1992 Regulation S

- other sources include the Loan Market Association’s primary loan documentation

- students are referred to case law throughout the course

- other relevant materials include the following texts which are recommended further reading:-

      - Andrews,G & Millett, R “Law of Guarantees”, Longmans 1995

      - Ferran, E “Company Law and Corporate Finance”, Oxford 1999

      - Lingard, JR “Bank Security Documents”, Butterworths 1993

      - Wood, PR “International Loans, Bonds and Securities Regulations, Law and Practice of International Finance” Vol 3, Sweet & Maxwell 1995

6. Assessment Infrastructure:

One 3- hour unseen, open book examination (with an additional 30 minutes of reading time).

The examination constitutes 100% of the marks for the study unit. The pass mark is 50%.

Second and final attempts: Re-assessment is by the same method as detailed above. See Assessment Regulations for further details.

Specification confirmed by ............................................... Date ....... February 2004

(Associate Dean, Faculty of Law)

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