Tusk Obligations: Borrower Obligation Tracking
Reporting covenants are how a lender watches a credit. Tusk Obligations pulls every obligation out of the agreement, the ancillary docs and every amendment.
Covenant Obligations Tracking & Reporting is now automated by CredCore.
A credit agreement is not dissimilar to a complex Monopoly game rules book - except this last for years. The borrowing enterprise makes a string of promises and every quarter submits a compliance report to the lender to show how they have performed against those promises.
Payment and reporting covenants recur for the life of the facility, quarterly financials and compliance certificates and audited statements inside a fixed window after year end, and a single tranche can carry more than three hundred separate obligations of that kind. No wonder, even most efficiently run CFO’s organization trip and breach covenants unintentionally, on an average three times during the life of a loan.
A miss here and the miss there.
The obligations that recur are the manageable half, painful as they are operationally, because a finance team can build a routine around a date it knows is coming. The risk of non-compliance is obligations that trigger on occurrence of specific events. Take an obligation that appears in most agreements, as an example, the requirement to notify the lender within a set number of days of completing an acquisition above an agreed size. In the flurry of activities that come along with an acquisition, it is understandable someone forgets to read the credit agreement, and the clock starts and does not surface a few days before when the compliance certificate is sent out - and the lender calls out on the trip.
The roster of obligations morph and change, since each amendment can add an obligation or move a date and the requirement that catches a borrower out is often one buried in a schedule to the second amendment eighteen months earlier. To add to this confusion, the person responsible for a specific obligation can be across various teams - Accounting produces the financial statements, legal handles notices and consents, treasury handles insurance, and delivering any one item on time means persuading three teams who each have their own quarter to close to act by a date that matters, so far as they can see, only to the person asking, who is usually maintaining a spreadsheet, has authority over none of them, and carries the event-driven obligations in their own memory.
What a Slip Actually Costs
A miss - let us assume a benign oversight - can be cured through a waiver or an amendment, which still means legal fees on both sides, and also the deal comes under the lens with the lender. The knock-on effects are harder to anticipate, because a lender who has found one error tends to look at the others. The operations team at the lender goes back through compliance packages already submitted, frequently months after the people who prepared them have moved to other roles, so that the work of proving everything else was correct costs considerably more than the thing that was missed.
In a relationship-driven cycle, the same institutions come back around at the refinancing, at the accordion, at the covenant reset requested on a tight timeline, so a slip often ends up as something a little more serious.
What Tusk Obligations Does
Tusk Obligations reads the whole document set, the credit agreement, the ancillary documents and pulls out every obligation, recurring and event-driven alike, with each one linked back to the clause it came from so that anyone can check it against the source language instead of trusting a summary.
Those obligations are calendared on CredCore’s platform, where they can be assigned to the team members. All the files, including the credit agreements become query-able, and a dozen different expert analysis produced by CredCore (for example Leakage Analysis, or Control obligations, or an Executive Summary), automatically, so you need to refer to an external law firm rarely.
The effect is that compliance becomes a process the company owns instead and survives employee changing roles.
Over a facility that runs five years or more, the value of never giving a lender a reason to look harder turns out to be considerably greater than the hours the work itself takes.