What an Institutional Term Sheet Covers

A term sheet — sometimes called a letter of intent or indicative terms — is a summary of the key commercial and structural terms on which a lender is prepared to provide a facility. It is not the facility agreement itself; it does not create binding lending obligations in most cases. Its purpose is to record the mutual understanding of the parties at a stage before the cost and time of full documentation is incurred, and to allow the borrower to compare offers from different lenders on a clear, consistent basis. A well-drafted term sheet reduces the risk of misunderstanding at the documentation stage and sets a clear framework for negotiation. A poorly drafted one — or one that is deliberately vague on economics — is a warning sign about the lender’s approach to the transaction.

The term sheet should specify the collateral in sufficient detail to be unambiguous: the issuer, ISIN, number of shares, and the exchange on which they trade. It should state the initial margin ratio, the maintenance margin threshold at which a margin call is triggered, and the period allowed to cure a margin breach — whether by topping up collateral, making a partial repayment, or other agreed means. The consequences of failing to cure within the stated period should also appear: typically, the lender’s right to realise the collateral. These provisions are not mere boilerplate; they are the operational heart of the facility and should be read carefully by the borrower and their advisers.

A term sheet typically includes a list of conditions that must be satisfied before the facility can be drawn. These commonly include completion of legal due diligence, satisfactory verification of the borrower’s identity and the ownership of the pledged shares, execution of pledge and security documentation, and receipt of any required regulatory notifications. The term sheet should state whether it is exclusive — that is, whether the borrower undertakes to negotiate only with this lender during a stated period — and the duration of any such exclusivity. Black Haven’s term sheets are clear on conditions and exclusivity, and the credit team is available to walk borrowers through each item so that the path to drawdown is understood before the term sheet is signed.