The Rise Of Limited Conditionality Commitment Letters In Canada

Limited conditionality commitment letters, a relatively new phenomenon in Canada, were developed in the United States, where sellers have typically resisted the inclusion of financing conditions in acquisition agreements. As a workaround, U.S. buyers convinced their lenders to grant financing commitments with limited conditions to funding the required amount on closing. Recently, in the context of acquisitions of private targets involving debt commitments of $1 billion or more, a number of commitment letters from Canadian lenders have contained similar limited conditions. This article will focus on some of the traditional conditions that are generally not present in limited conditionality financing commitment letters and on the impact of such omissions on lenders and buyers.