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Senior Promissory Note for Germany

Senior Promissory Note Template for Germany

A Senior Promissory Note (Schuldscheindarlehen) under German law is a debt instrument that combines elements of traditional loan agreements with characteristics of bonds. This document establishes the terms of a senior-ranking debt obligation, including principal amount, interest calculations, repayment terms, and the rights and obligations of both the issuer and noteholder. Subject to German law, particularly the German Civil Code (BGB) and commercial regulations, it provides a flexible financing tool that can be structured to meet specific funding needs while maintaining the formal requirements of German debt instruments.

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What is a Senior Promissory Note?

The Senior Promissory Note (Schuldscheindarlehen) is a traditional German debt instrument used for corporate financing, particularly popular among medium to large-sized companies seeking alternative funding sources to traditional bank loans or bonds. This document type is governed by German law and combines the flexibility of a loan with certain characteristics of a bond, making it attractive for both issuers and investors. It typically includes detailed provisions on interest calculations, repayment terms, transferability, and the senior ranking status of the debt. The instrument is particularly valued for its relatively straightforward documentation requirements under German law, while still providing robust creditor protection. Used primarily for medium to long-term financing, it can be structured with various interest rate options and repayment profiles to match the issuer's funding needs.

What sections should be included in a Senior Promissory Note?

1. Parties: Identification of the issuer (borrower) and the initial noteholder (lender)

2. Background: Context of the issuance and the purpose of the promissory note

3. Definitions: Key terms used throughout the document

4. Principal Amount: The amount of the loan and currency

5. Interest Rate and Calculation: Interest rate, calculation method, and payment dates

6. Repayment Terms: Schedule and method of principal repayment

7. Payment Provisions: Details of payment mechanics, including account information and payment dates

8. Senior Ranking Status: Confirmation of the senior ranking status and related provisions

9. Representations and Warranties: Standard declarations by the issuer regarding its status and capacity

10. Events of Default: Circumstances that trigger default and acceleration

11. Governing Law and Jurisdiction: Confirmation of German law application and jurisdiction

What sections are optional to include in a Senior Promissory Note?

1. Security: Include if the note is secured by any assets or guarantees

2. Tax Gross-up: Include if tax gross-up provisions are required

3. Transferability: Include if the note can be transferred and under what conditions

4. Financial Covenants: Include if specific financial metrics must be maintained

5. Information Undertakings: Include if regular financial or other reporting is required

6. Increased Costs: Include if the lender can pass on regulatory or other cost increases

7. Market Disruption: Include for floating rate notes to address market disruption scenarios

What schedules should be included in a Senior Promissory Note?

1. Repayment Schedule: Detailed amortization schedule if applicable

2. Form of Transfer Certificate: Standard form for documenting transfers if transferability is permitted

3. Calculation of Interest: Detailed methodology for interest calculations

4. Form of Compliance Certificate: Template for periodic compliance confirmations if required

5. Notice Details: Contact information and notice requirements for all parties

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Germany

Publisher

Genie AI

Document Type

Promissory Note

Sector

Banking

Cost

Free to use

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