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ARTICLE · 10 JULY 2009

Market MACs

McCarthy Tétrault
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As a result of the credit crisis, lenders are placing greater reliance on market material adverse change (market MAC) provisions in commitment letters.

CanadaFinance and Banking
Andrew Matheson
Andrew Matheson
R. Paul Steep
R. Paul Steep
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As a result of the credit crisis, lenders are placing greater reliance on market material adverse change (market MAC) provisions in commitment letters. These clauses remain untested in Canadian courts, and it is highly likely that a duty of good faith applies. Nevertheless, by carefully negotiating and exercising a market MAC, lenders may significantly improve its enforceability.

A market MAC (also known as "market out") relieves a lender of its obligations under a commitment letter in the event of a "material adverse change" in financing, banking or capital markets. The objective is to protect lenders against the risk that a loan cannot be syndicated (at least on its original terms) due to unanticipated changes in the markets generally.

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