An acquisition bond, also known as a term loan or acquisition agreement, gives the owner the option to borrow a certain amount for a period of time at an agreed interest rate (often linked to an index). The agreement will include certain contingencies, such as: projects may be delayed due to labour market strikes, contracting problems, environmental problems or a host of other variables. Faced with the prospect of a higher cost of these setbacks, a developer might be tempted to abandon the project and make up for the loan. This is why short-term lenders generally require an acquisition commitment from another lender who has agreed to become the permanent holder of the mortgage before declaring himself a lender. Acquisition commitments reduce the risk to construction loan lenders and allow for development. Real estate developers typically borrow short-term funds (bridge loans) to finance the construction of their projects. Efficient on the date of purchase and after the date of purchase of any mortgage purchased by the buyer, the seller commits free of charge and unrelated, all rights, securities and interest of the seller on an applicable takeout obligation and a takeout contract for such a mortgage credit; provided that the buyer has not taken or failed to comply with the seller`s obligations under a takeover agreement or takeout. For projects for which the financial closure has not yet been completed, IIFCL will enter into a support agreement at the time of the financial closing of the project. The acquisition obligation is a written guarantee from a lender to provide permanent financing to replace a short-term loan at some point, when the project has reached a certain date. Under the takeout agreement, the outstanding loan of (i) L-T Infrastructure Finance Company Limited, (ii) IndusInd Bank Limited and (iii) India Infrastructure Finance Company Limited is Rs 564.3750.
Of course, the developer does not want to take the risk that the permanent lender will withhold funds because of contingencies that could affect the repayment of the construction loan. Acquisition commitments therefore also include provisions for the financing of gaps. If one of the contingencies is triggered by a partial payment from the permanent lender. Engagement is often from room to room. Ceiling-to-ceiling ceiling means that a certain final amount is lent to the project, and a lower amount is borrowed if contingencies are not met. These contingencies seek to protect or compensate both the permanent lender and the initial short-term lender in the event of problems on the street. The operating principle is that it is up to the developer, not the bank, to ensure that the project moves smoothly. The Bank will endeavour to limit its exposure to developer problems.