Till Breach Do Us Apart - The Law Surrounding Prepayment Premiums
Court Uncourt, Volume II, Issue V
7 Pages Posted: 4 Sep 2015
Date Written: September 1, 2015
There is a rigorous need for consistency in the market dealing with publicly traded securities as rapid advancements in the legal diaspora can add unwitting complexity to the requirements of the debtors. If the contracts between borrowers and lenders do not outline distinct covenants which comply with the local laws and precedents of the court, it can result in inadvertent and protracted litigation which can be detrimental to both parties.
This two part series paper seeks to explore and discuss the legal effect of prepayment premiums charged by banks. The First part deals with acceleration clauses found in debt instruments and the second part with the make whole premiums which has effect of offsetting the downside risk when the borrower, after enjoying a favorable interest rate on loan during the periods of rising interest rates, unilaterally opts to prepay the loan.
Keywords: Banking, makewhole premium, liquidated damages, upside fee agreement, law, legal
JEL Classification: K20, K22, G24,G15, G20, N20, K40, K30
Suggested Citation: Suggested Citation