A Common Terms Agreement (CTA) has become the structural backbone of almost every large Vietnamese infrastructure and energy financing that draws on more than one pool of capital.
When a sponsor stitches together a club of commercial banks, one or two development finance institutions (DFIs), and an export credit agency (ECA) behind a single LNG terminal, offshore wind farm, or toll-road concession, the parties quickly discover that each lender class arrives with its own credit policy, its own precedent documentation, and its own appetite for construction risk.
The Common Terms Agreement exists precisely to reconcile those differences into one harmonized set of representations, conditions precedent, covenants, and events of default that every tranche shares, while leaving pricing, repayment profiles, and lender-specific conditions in separate facility agreements.
For sponsors, general counsel, and lenders active in Vietnam’s project finance market, understanding how a Common Terms Agreement is built — and where it still leaves room for divergence — is now a threshold competency rather than a specialist curiosity.
Table of Contents
- 1. What a Common Terms Agreement Is and Why Vietnamese Deals Need One
- 2. Typical Structure of a Multi-Source Financing Package
- 3. Harmonizing Conditions Precedent Across Tranches
- 4. Intercreditor Arrangements Among Senior Lenders
- 5. The Common Security Package
- 6. Majority Lender Concepts and Voting Thresholds
- 7. DFI and ECA-Specific Considerations Inside a Common Terms Agreement
- 8. Drafting Sequence and Negotiation Dynamics
- 9. Common Pitfalls in Vietnamese Multi-Source Deals
- 10. Frequently Asked Questions
1. What a Common Terms Agreement Is and Why Vietnamese Deals Need One
In a standalone bilateral loan, one facility agreement carries everything: conditions precedent, covenants, representations, events of default, and commercial terms such as margin and tenor. Multi-sourced project finance breaks that single document into layers.
A Common Terms Agreement captures the terms that must be identical, or at least mutually acceptable, across every tranche — project definitions, construction milestones, environmental and social standards, information covenants, and the trigger events that put the whole financing package into default. Separate facility agreements for each tranche then carry out the commercial terms that genuinely differ: interest margin, commitment fees, repayment schedule, and tranche-specific conditions a particular lender insists on.
Vietnamese infrastructure and energy projects — LNG-to-power plants, offshore wind, toll roads, and large industrial parks — routinely need capital stacks beyond what any single commercial bank group can underwrite, particularly given Vietnam’s foreign-loan registration regime administered by the State Bank of Vietnam and sector-specific lending caps. Layering in IFC, ADB, or a bilateral DFI, together with an ECA tied to imported turbines or equipment, is often the only way to reach financial close at the tenor and size the project needs.
1.1 Market Practice Origins
The CTA format grew out of the Loan Market Association’s (LMA) multi-sourced facility documentation, designed to let sponsors run parallel negotiations with different lender classes without re-litigating identical defined terms five times over. Vietnamese deal teams increasingly start from an LMA-influenced template and adapt it to local law, SBV approval conditions, and Vietnamese security perfection requirements.
2. Typical Structure of a Multi-Source Financing Package
A fully layered financing for a Vietnamese power or infrastructure project typically comprises the Common Terms Agreement itself, an Intercreditor Agreement, a Common Security Agreement (or several security documents sharing one trust or agency structure), individual facility agreements per tranche, and a Direct Agreement with the offtaker or concession grantor. The Common Terms Agreement sits above the individual facility agreements as the master reference document; each facility agreement incorporates the CTA’s defined terms, conditions precedent, and covenant package by reference.
2.1 Typical Tranche Composition
A representative Vietnamese renewable energy or LNG project might see a senior commercial bank tranche (often a syndicate of Vietnamese and regional banks), a DFI tranche from IFC, ADB, or a bilateral development bank, and an ECA-covered tranche tied to equipment procurement from the exporting country. Each tranche has a different facility agent, but all three share the Common Terms Agreement’s conditions precedent and events of default.
2.2 Agency and Agent Roles
Multi-source deals usually appoint a Facility Agent for day-to-day administration, a Security Agent (or Security Trustee, depending on whether Vietnamese law recognizes a trust-equivalent structure for the relevant security type) to hold the common security package on behalf of all secured parties, and sometimes an Intercreditor Agent to administer waterfall and voting mechanics distinct from facility administration.
3. Harmonizing Conditions Precedent Across Tranches
One of the CTA’s central jobs is condition precedent (CP) harmonization. Without it, a sponsor could face five parallel CP lists, each lender group insisting its own checklist be satisfied before its tranche funds, with duplicated — and sometimes contradictory — documentary requirements.
3.1 Building a Single Common Terms Agreement CP Checklist
The Common Terms Agreement sets out CPs that apply to all tranches: corporate authority documents, project agreements (EPC contract, offtake or power purchase agreement, land-use rights documentation), environmental and social impact assessment approvals, insurance arrangements, and the common security package being perfected to agreed priority. Tranche-specific facility agreements then add only the narrow set of conditions unique to that lender — an ECA cover letter, a DFI environmental category classification sign-off, or a specific government guarantee.
3.2 CP Waiver and Extension Mechanics
Because missing a single CP can delay the entire multi-tranche drawdown, the CTA usually specifies whether a CP can be waived unilaterally by the agent, requires majority lender consent, or requires unanimous consent of all senior lender classes — a question resolved through the voting threshold framework discussed below.
4. Intercreditor Arrangements Among Senior Lenders of Different Classes
Even where all tranches are pari passu in ranking, commercial banks, DFIs, and ECAs do not behave identically when a project runs into trouble. DFIs often carry policy-driven step-in rights tied to environmental and social covenants; ECAs are frequently influenced by their home-country export credit policy and may have different risk tolerance around political risk cover. The Intercreditor Agreement, closely cross-referenced to the Common Terms Agreement, allocates decision rights, payment waterfall priority during a standstill, and enforcement coordination among these senior classes.
4.1 Standstill and Enforcement Coordination
A standstill period prevents any single lender class from accelerating or enforcing security unilaterally once a default is called, giving the group time to agree a common response. Vietnamese deals typically set standstill periods in the 90-180 day range for payment defaults versus a shorter window for insolvency-related triggers, mirroring broader multi-sourced project finance market practice.
4.2 Payment Waterfall Among Classes
Absent a default, cash generally flows pro rata to each tranche according to its outstanding exposure. Post-default, the CTA and Intercreditor Agreement typically switch to a common waterfall that pays costs and hedging obligations first, then pro rata principal and interest across senior classes, deliberately avoiding structural subordination of DFI or ECA debt behind commercial bank debt.
5. The Common Security Package
A defining feature of multi-sourced project finance is that all senior lenders — regardless of class — share one common security package rather than each tranche taking separate, competing security.
In Vietnam this typically includes a mortgage over land-use rights and project assets (subject to Vietnamese restrictions on mortgaging certain land-use right categories to foreign lenders), a pledge over the project company’s shares, an assignment of project contract receivables, and a pledge over the project company’s bank accounts, often structured as a cascading or waterfall account arrangement.
5.1 Security Agent Structuring and Perfection Under Vietnamese Law
Because Vietnamese law does not fully recognize an English-style security trust, deal teams commonly use a security agent model combined with parallel debt or joint and several creditor structures to ensure that security remains effective and enforceable for the benefit of all lenders as a class, even as individual lenders transfer or trade their exposure.
Registration of security interests with Vietnam’s National Registration Agency for Secured Transactions, and compliance with foreign-loan registration at the State Bank of Vietnam, are both necessary steps that the Common Terms Agreement’s conditions precedent will typically require evidence of.
5.2 Release, Substitution, and Enforcement of Common Security
Because security is shared, no single lender class can unilaterally release or enforce it. The CTA and Intercreditor Agreement set out the majority threshold required to instruct the Security Agent to enforce, and the mechanics for releasing security on a permitted disposal or partial repayment.
6. Majority Lender Concepts and Voting Thresholds
Because a Common Terms Agreement binds lenders who are not party to each other’s facility agreements, it needs its own voting mechanics distinct from any single tranche’s internal majority lender provisions.
6.1 Defining Majority Lenders Across Classes
Typically “Majority Lenders” under the Common Terms Agreement means lenders holding a stated percentage — commonly 66⅔% — of the aggregate outstanding exposure across all tranches combined, rather than a majority within any single tranche. This prevents a single lender class, even a large DFI tranche, from controlling amendment decisions on its own, while also preventing commercial banks from overriding DFI-specific protections.
6.2 Entrenched Rights Requiring Unanimity
Certain decisions are “entrenched” and require unanimous consent of all affected lenders regardless of majority voting outcomes: changes to pricing, maturity extension, release of the common security package, and changes to the payment waterfall. Vietnamese deals frequently add project-specific entrenched items, such as any amendment affecting compliance with environmental and social covenants a DFI tranche requires as a matter of policy.
6.3 Class Voting Versus Aggregate Voting
Some CTAs layer class-based voting on top of aggregate voting — requiring both an aggregate majority and, for certain decisions, a majority within each lender class — specifically to protect DFI or ECA tranches from being outvoted purely by commercial bank numbers when DFI participation, while smaller in absolute dollars, carries policy significance the DFI will not allow to be overridden.
7. DFI and ECA-Specific Considerations Inside a Common Terms Agreement
DFIs such as IFC and ADB, and bilateral ECAs, bring conditions that commercial banks typically do not require, and the CTA has to accommodate these without fracturing the harmonized structure.
7.1 Environmental and Social Covenant Harmonization
DFIs generally require IFC Performance Standards-equivalent environmental and social covenants, ongoing monitoring reports, and an action plan with specific completion deadlines. Rather than maintaining two separate covenant packages, well-drafted CTAs for Vietnamese projects increasingly adopt the DFI’s environmental and social standard as the common covenant applicable to all tranches, since commercial banks are rarely worse off accepting a higher environmental bar.
7.2 ECA Cover Conditions and Procurement Nexus
ECA tranches are usually conditional on a procurement nexus — equipment or services sourced from the ECA’s home country up to a specified percentage — and on maintaining political risk insurance or sovereign cover arrangements. These conditions typically sit in the ECA-specific facility agreement rather than the Common Terms Agreement itself, but the CTA’s events of default framework must still accommodate an ECA cover cancellation as a potential trigger affecting the whole financing.
8. Common Terms Agreement-Based Structuring Versus Standalone Facility Agreements
The table below summarizes the practical differences sponsors and lenders weigh when choosing between a Common Terms Agreement structure and simply running separate, standalone facility agreements for each lender group.
| Dimension | Common Terms Agreement Structure | Standalone Facility Agreements |
|---|---|---|
| Documentation effort | Higher upfront drafting cost; one negotiation for shared terms | Lower upfront cost per agreement, but duplicated negotiation across lenders |
| Conditions precedent | Harmonized checklist, single CP satisfaction process | Each lender group runs its own CP process, risk of conflicting requirements |
| Security | Single common security package, shared pari passu ranking | Competing or layered security, higher enforcement complexity |
| Amendment and waiver process | Defined majority and entrenched-right voting across all lenders | Each facility amended independently; no cross-lender coordination mechanism |
| Default coordination | Cross-default and standstill mechanics built in via Intercreditor Agreement | Requires separate cross-default clauses negotiated bilaterally between agreements |
| Suitability | Large multi-source infrastructure and energy deals with 3+ lender classes | Smaller deals with a single lender or homogeneous syndicate |
9. Drafting Sequence and Negotiation Dynamics
In practice, the CTA is rarely drafted from a blank page. Sponsors’ counsel typically circulate a term sheet reflecting commercial agreement on tenor, pricing bands, and security principles before the first Common Terms Agreement draft, then negotiate the CTA and Intercreditor Agreement in parallel, since voting thresholds in one directly affect drafting choices in the other.
9.1 Negotiation Leverage Among Lender Classes
DFIs typically have the least flexibility on their standard covenant and environmental requirements, given internal policy constraints, while commercial banks have the most room to negotiate commercial terms but the least appetite to accept DFI-driven covenant burdens without reciprocal protections, such as a DFI tranche being treated as reducing overall project risk and thereby justifying pricing concessions elsewhere.
9.2 Sponsor’s Role in Coordinating Multiple Lender Counsel Teams
Because each lender class typically retains separate counsel, the sponsor’s legal team plays a coordination role, consolidating comments, flagging where one lender class’s proposed language conflicts with another’s, and keeping the Common Terms Agreement from becoming an unworkable patchwork of conflicting drafting conventions.
10. Common Pitfalls in Vietnamese Multi-Source Deals
Several recurring issues surface in Vietnamese multi-sourced project finance deals that sponsors should anticipate early.
10.1 State Bank of Vietnam Registration Timing
Foreign loan registration with the State Bank of Vietnam is a condition precedent that can take longer than sponsors expect, and a Common Terms Agreement drafted without buffer time for this step risks a mismatch between CP satisfaction deadlines and actual registration timelines.
10.2 Restrictions on Mortgaging Land-Use Rights to Foreign Lenders
Vietnamese law restricts which categories of land-use rights can be mortgaged in favor of foreign credit institutions, which means the common security package often has to be structured asymmetrically — with a domestic security agent or local bank holding certain security elements on behalf of the full lender group — a nuance a template CTA imported wholesale from another jurisdiction will miss.
Two drafting points deserve separate attention. First, majority lender voting thresholds should be set deliberately: sponsors commonly seek a two-thirds threshold for ordinary amendments, with unanimity reserved for payment terms and release of security (verify against the agreed term sheet). Second, DFI and ECA co-financing Vietnam transactions add policy-driven consent rights, so the Common Terms Agreement should state clearly which lender class controls each category of decision.
Frequently Asked Questions
What is the difference between a Common Terms Agreement and an Intercreditor Agreement?
The Common Terms Agreement harmonizes conditions precedent, covenants, and events of default across tranches; the Intercreditor Agreement governs ranking, voting, and payment priority disputes between lender classes.
Do all multi-source Vietnamese projects need a Common Terms Agreement?
Not always — smaller deals with a single lender class or homogeneous syndicate often use a single facility agreement instead, reserving a Common Terms Agreement for deals with three or more distinct lender classes.
Can commercial banks override DFI environmental covenants under a CTA?
Generally no. Environmental and social covenants required by a DFI are typically entrenched or protected by class voting, preventing commercial bank majorities from amending them unilaterally.
How are voting thresholds typically set in a Vietnamese multi-source Common Terms Agreement?
Majority Lender decisions commonly require around 66⅔% of aggregate exposure across all tranches, with entrenched rights such as pricing and security release requiring unanimous consent.
Who holds the common security package in a Vietnamese CTA structure?
Typically a security agent model, often paired with a domestic entity for land-use right security given Vietnamese restrictions on foreign mortgagees, holding security for the benefit of all senior lenders as a class.
Sponsors assembling a multi-source financing for a Vietnamese infrastructure or energy project should engage legal counsel early enough to sequence the Common Terms Agreement, Intercreditor Agreement, and security documentation in parallel with lender due diligence, rather than treating the Common Terms Agreement as a late-stage drafting exercise. For further reference on multi-sourced facility documentation conventions, see the Loan Market Association and the IFC infrastructure finance resources. Learn more about IVLF Advisors’ project finance advisory services or review our broader banking and finance practice.
This article provides general information about market practice in multi-sourced project finance and does not constitute legal, tax, or financial advice. Sponsors and lenders should seek advice tailored to their specific transaction and circumstances.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
