Financial Close

I achieved financial close today!  That means the credit from the bank for the Ravenswood project has finally been approved.  Whew!

We were supposed to achieve financial close on Friday.  I started on this in early July, after the approval of the Commitment Letter by Credit Union Central.  Closing involves a lot of paperwork and signatures from a lot of places.  The wire transfer to the turbine supplier is about to go – it is one day late – embarrassing, but still it is done.

The lender’s lawyer need to see the Power Purchase Agreement from the Ontario Power Authority.  They need to see the land leases.  They need to change the leases.  They need lease acknowlegements signed by the landowners.  They need to see the Connection Agreement with Hydro One.  They need to see the zoning approval from the municipality.  They need to see the Vestas Warranty and Maintenance Agreements.  They need Assignments of Warranty and Maintenance Agreements.  They need a letter stating that I work for Sky Generation.  (Huh? What do they think I do?).  They need a postponement of claim on the turbines from the landowner’s lender.  They need an invoice for the turbines.  They need to see the articles of incorporation.  They need to see confirmation that the property taxes on the lands are current.  The revised leases need to be registered on the deeds.  And more.

And I specifically worked with the Credit Union to try to limit the scope of documents required.  We did this somewhat successfully, but there is still a LOT of paper.

The financial close involved a lot of things.  The lawyer for Credit Union Central, the lender, wanted some changes to the landowner’s lease.  With great co-operation from the landowners, we got the signatures in a day.  Hydro One got their assignment of material contract in on Friday.  Vestas got their assignment of material contract in today.  The lawyer for Credit Union Central had to approve both, as the legal departments of Hydro One and Vestas wanted some small changes.

I am certain that lawyers must have a good grounding in physics.  They invented the concept of the black hole.  It is called the legal department.  When something is turned into the “legal department”, it never returns on its own.  They also invented the splitting of the atom.  Because once a split hair has been split, and split again, and split again, it soon becomes subatomic.

I need a few lawyer jokes to help me through this process.  What is the difference between a bucket of pond scum, and a lawyer?  The bucket.  That sort of thing.  Of course, a joke like that is a bit harsh.  It’s not that lawyers are scummy, it is that they try to cover risks, whether they exist or not, with paper.  It is all done ostensibly to protect the lender.  But the true protection for the lender comes in who they are dealing with, not in the paper.  After hearing the lawyers argue inane points about what is legal, what isn’t, what the impact of the  Planning Act is, whether a postponement of claim should have a comma or a period, it is becoming increasingly clear to me that there is no such thing as legal truth.  The lenders require a developer to pay for the lawyer to paper a deal with paper that the other lawyer says isn’t valid.  It is buying paper insurance that nobody knows if it will work.  The comma might be in the wrong place.

And of course, Murphy is at work.  Trying to reach lawyers at conferences in Spain.  Dealing with holidays.  Waiting until the last possible moment.  The last change suggested to the lease was sent at 7:56 AM on Friday – the day we were supposed to close!  That suggestion was not integrated into the lease – sorry.

My brother moved to the US in 1990, and set up a computer distributor, EMJ America.  The advice from all quarters was be very careful.  The US is a very litigious society.  Hire good lawyers.  After 17 years in business, the firm has never had a lawsuit.  Why?  Because they do what they say they are going to do.  They behave honestly and ethically with suppliers and customers, and treat them fairly.  You can’t paper that.  But it is the critical thing for a lender to have – an ethical borrower.

But it is part of the development process.  And it is done.

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