Key terms in project finance documentation and drafting tips — undertakings

In a project finance transaction, undertakings (or covenants as they are sometimes called) are extensive. They are promises given by the borrower and sometimes other obligors (for example, guarantors or security providers) to the lender to perform or not perform certain actions. The breach of an undertaking often triggers an event of default.

In contrast to representations, undertakings will remain in force throughout the life of the facility.

Undertakings are designed to ensure that the borrower develops, constructs and operates the project within the parameters agreed with the lenders. Like undertakings in any other form of financing, they are intended to ensure that the lenders find out about problems as quickly as possible. This guidance note outlines the key matters to consider when drafting undertakings in a project finance transaction.

See Key terms in project finance documentation and drafting tips — undertakings.