Limited Recourse Loan Agreement Template for Hong Kong

The Limited Recourse Loan Agreement is a specialized financing document used when lenders agree to restrict their enforcement rights to specific assets or a defined pool of collateral, rather than having recourse to all assets of the borrower. This type of agreement is commonly used in project finance, asset-based lending, and structured finance transactions in Hong Kong. The document must comply with Hong Kong's banking regulations, security laws, and contract law principles. It typically includes detailed provisions on the secured assets, enforcement mechanisms, representations and warranties, covenants, and events of default, all tailored to reflect the limited recourse nature of the facility. The agreement is particularly relevant for transactions where ring-fencing of assets or project-specific financing is required, and where lenders are comfortable with the value and quality of the specified collateral package.

1. Parties: Identifies the lender(s) and borrower(s) as parties to the agreement

2. Background: Sets out the context of the loan and the limited recourse nature of the arrangement

3. Definitions and Interpretation: Defines key terms and establishes interpretation principles

4. The Facility: Details the loan amount, purpose, and availability

5. Limited Recourse Provisions: Specifies the limited recourse nature, including the specific assets against which recourse is available

6. Conditions Precedent: Lists conditions that must be satisfied before the loan becomes available

7. Drawdown: Specifies the drawdown mechanics and requirements

8. Interest: Sets out interest rate, calculation methods, and payment dates

9. Repayment: Details repayment terms, including scheduled repayments and final maturity

10. Security: Describes the security package and enforcement limitations

11. Representations and Warranties: Sets out the borrower's representations and warranties

12. Covenants: Details positive and negative undertakings of the borrower

13. Events of Default: Lists events triggering default and available remedies within recourse limitations

14. Payments: Specifies payment mechanics, currency, and tax provisions

15. Changes to Parties: Covers assignment and transfer provisions

16. Administration: Covers notices, calculations, and other administrative matters

17. Governing Law and Jurisdiction: Specifies Hong Kong law as governing law and jurisdiction for disputes