Noel Casey KC

The cost of further assurance

When a further assurance clause (FAC) provides that one party to a loan agreement is to take steps “at the cost” of one of the other parties, sundry questions may arise as to when that debt falls due; whether the debt is subordinated to that owed to other lenders; how it is to be quantified; and how it might be recovered. This article considers those issues where a mezzanine lender has assumed an obligation to provide further assistance or assurance at the request of a senior lender, on the basis that the costs are to be borne by the senior lender or the borrower.