Introduction

Lenders use MAC Provisions in financing agreements to protect themselves against unforeseeable events. Lenders are concerned by potential changes that could alter the borrower´s ability to meet their financial obligations as well as market disruptions that can limit lenders´ ability to lend. These provisions if well drafted and if successfully invoked will allow the party claiming the MAC to avoid a transaction which may be detrimental. However the use of these provisions has several other consequences which may ultimately have worse consequences than claiming a MAC such as resulting in lengthy litigation between the parties.

Overview of MAC provisions

In general a Material Adverse Change (MAC) provision can protect lenders from certain specific changes in the business of the borrower which may affect the borrower’s ability to service its debt. Moreover a MAC provision can also protect lenders from...