Editing a Sanction Note: Precision, Pronoun Reference and Discretionary Wording
A credit analyst has drafted the following paragraph for a sanction note on a toll road SPV:
"The promoter has assured that the balance land will be acquired before COD, however the same is yet to be transferred to the SPV, and the project DSCR of 1.18 is comfortable, being the loan is repayable over 15 years. The EPC contractor, whose track record is satisfactory, has agreed to complete the work in 30 months from the date of this sanction, and the lender may consider the disbursement after the achievement of the conditions precedent."
The credit committee has returned the note with three observations: the land position is unclear, the comfort on DSCR is unsupported, and the disbursement language does not tell anyone what will actually happen. A junior analyst proposes replacing "however the same is yet to be transferred" with "although the land is yet to be transferred". The committee has also questioned the use of "assured" and "may consider the disbursement" in a document that will be relied on by the sanctioning authority and, potentially, in litigation.
1. Identify the three defects in the paragraph - one of grammar/punctuation, one of reference, one of logic - and rewrite the passage as two sentences without changing its substance.
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Defects.
- Grammar/punctuation: "however" is a conjunctive adverb, not a coordinating conjunction. Joining two independent clauses with a comma before it produces a comma splice. It requires a semicolon or a full stop, or the sentence must be restructured with "but".
- Reference: "the same" is a legalistic substitute for a noun and its referent is genuinely ambiguous - is it the land, the acquisition, or the title? A reader cannot tell whether the land is unacquired or acquired but untransferred. That distinction changes the condition precedent entirely.
- Logic: "being the loan is repayable over 15 years" is a dangling participial construction that asserts a causal link it never establishes. A DSCR of 1.18 is not made comfortable by a 15-year tenor; if anything, a longer tenor compresses annual debt service and flatters DSCR while extending exposure. The clause also smuggles in a conclusion ("comfortable") that the note has not evidenced.
Rewrite. "The promoter has undertaken to acquire the balance land before COD; however, title to that land has not yet been transferred to the SPV. The projected DSCR of 1.18 leaves limited headroom against the 15-year repayment profile and should be read together with the land condition precedent."
The rewrite separates the two land facts, removes the unsupported comfort judgement, and keeps the condition precedent visible.
2. The junior analyst proposes "although the land is yet to be transferred". Does this rewrite preserve the intended meaning? Explain what changes.
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It preserves the fact but changes the relationship between the facts, which is the part the committee cares about.
"However" sets up two coordinate assertions in tension: the promoter has promised the land, and the land is not with the SPV. Both stand on their own, and the tension is explicit. "Although" subordinates the land position into a concessive clause attached to the first statement - it downgrades the missing title to a qualification on the promoter's promise. Read quickly, the sentence then says "the promoter has assured us about the land, notwithstanding a minor caveat" rather than "the security is not in place."
There is also a mechanical loss. The original, once punctuated correctly, has two clauses that can each be tested and evidenced. The rewrite collapses them into one, so a later reader cannot tell whether the transfer failure is a title defect, an administrative delay, or a pending registration.
Verdict. Reject the rewrite. The correct fix is punctuation, not subordination: "…before COD; however, title to that land has not yet been transferred to the SPV." Preserve the contrast; correct the grammar.
3. Recommend the wording that should replace "assured" and "may consider the disbursement", and explain the commercial consequence of each choice.
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"Assured" → "has undertaken" or "has covenanted". "Assured" describes a state of mind on the promoter's part; it creates no obligation and cannot be breached. In a sanction note it typically reflects an oral statement at a meeting. "Undertaken" records a binding commitment, which can then be attached to a consequence - typically that no disbursement occurs until title is transferred, or that the promoter funds the shortfall if it is not.
"May consider the disbursement" → "shall disburse only upon satisfaction of the conditions precedent set out in Schedule X". "May consider" is discretionary on the lender and therefore unenforceable by the borrower; it is also unenforceable against the lender's own officers, who can disburse without breaching anything. "Shall disburse only upon" converts the conditions precedent into a hard gate and protects the bank if a disbursement is later challenged internally or in litigation.
Commercial consequence. The difference is not stylistic. If land is not transferred and the loan has been disbursed under the "may consider" wording, the bank has funded an unsecured construction period and must argue that a condition precedent was implied. Under the recommended wording, no disbursement could lawfully have occurred, and the exposure is the borrower's problem, not the lender's.
Note also that "satisfactory" track record should be replaced with a specific test (number of completed projects of comparable size, liquidated damages secured by a performance bond), for the same reason - adjectives are not covenants.