Dedicated Commercial Paper Sales

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Financing Transactions in Africa Legal
Considerations
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The Participants

• 1. Who are the participants?
• natural persons, companies (private and public),
  statutory or governmental bodies, government
  agencies, partnerships, trusts
• 2. What do they intend by entering into the
  agreement?
• 3. What is the relationship between the parties?

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Legal Due Diligence
At the outset of the negotiations, the following
documents must be obtained as they confirm the
participants capacity and authority to enter
into the agreements a. Constitutive
documents b. Solvency Certificates c. Writt
en confirmation of the status of the
participant d. Board Resolutions Conduct a
company search and confirm by participants body
of law allows for the intended transaction.

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The Legal Environment

• Governing law and Jurisdiction of the Courts
• Codified legal systems vs Sovereign legal systems
• Ensure congruence between laws governing the
  participants, esp with regard insolvency law

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The Legal Environment contd.

• Ask
• Who are the participants and are they capable of
  entering into the proposed transaction (consider
  local laws, constitutive documents, company
  board resolutions, extracts of minutes etc)?
• Where are they incorporated and where do they
  carry on their main business?
• Where are its assets? Are they capable of being
  encumbered?
• Are there any possible exchange control
  implications?

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The Nature of the Asset

• Ask
• What type of security am I looking for?
• Should I have direct or indirect recourse to the
  asset?
• Where is that asset?
• How best can I secure myself?
• What is the value of the asset?
• 6. Do I need to have it registered and would any
  security arrangement regarding the asset require
  any regulatory approvals and consents?

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Security

• Be careful of existing security arrangements
• Note in particular negative pledges,
  government guarantees
• Check the local companies office, registry for
  the registration and filing documentation of any
  asset belonging to the relevant participant
• Rather obtain additional security/ collateral
  than have too little (take into consideration
  the time/value of the asset)
• Ensure enforceability
• Always have a plan B!

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Indentifying the Risks

• Counterparty Risk
• Credit Risk
• Sovereign Risk (transferability and political)
• Fraud
• Insolvency Risk
• Documentation
• Market Risk
• Currency Risk
• How do you mitigate these risks?

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Legal Documentation

• SUGGEST
• 1. A belts and braces approach
• 2. Include clauses that allow you to monitor your
  participant and that give you the greatest
  chances of obtaining enforceable security (e.g.
  Material Adverse Change, Representations and
  Warranties regarding the status of the asset,
  cross-default, cross-acceleration)
• Includes clauses to ensure your own status (e.g.
  sovereign immunity, confidentiality, subrogation
  (disclosed/ Undisclosed), assignment)
• 4. Consult with the regulators as EARLY as
  possible
• BE AWARE OF ANY FILING AND REGISTERING PROCEDURES
  

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Enforceability
LEGALITY, VALIDITY ENFORCEABILTY IS KEY 1.
Prior to the contract coming into being (CP 2.
During the period of the contract (Events of
Default, esp Insolvency) 3. After the expiration
of the contract Obtain an independent legal
opinion from local counsel detailing a) the
manner in which the asset must be secured and
b) the steps for enforcement. In-house legal
opinions are generally NOT BINDING. Ask Are
foreign judgments recognised and enforceable?

• Local funding options are more widely available
  by utilising local capital markets
• Interest rate differentials between many emerging
  market currencies and USD/Euro has disappeared
• Increase visibility
• Pricing
• Tenor
• Yield Curve restrictions
• Understanding the Credit

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So how do we increase cash flows into Africa?

• Clarity
• 2. Transparency
• 3. Certainty
• Legislation and legal systems to ensure
  collateral controls