Court holds borrower liable to pay break fee under one-sided mandate letter

Court holds borrower liable to pay break fee under one-sided mandate letter

Advising Specialist Risk Group on the Acquisition of Consort Insurance

In the recent case of Astra Asset Management v Odin Automotive [2023] EWHC 1465 (Comm), the English High Court granted summary judgment in favour of the arranger of a loan facility, holding that on the wording of the mandate letter the borrower was liable to pay the break fee when the borrower did not proceed with the proposed facility.

Break fees

Break fees or exclusivity fees are often used in financing transactions. They are used by lenders/arrangers mainly for two reasons:

  • To help them to cover the expenses of due diligence, arranging and documenting a loan transaction if it does not complete.
  • To protect them because the borrower is required to pay the fee if it seeks an offer of finance from another lender (without necessarily receiving and/or accepting that offer).

Break fee/exclusivity fee provisions are typically included in a mandate letter or a term sheet between the lender/arranger and the relevant borrower.


Astra Asset Management (Astra) is a leading alternative credit and investment manager. Odin Automotive (Odin) operates in the electrically powered vehicle sector.

In late 2021 Odin sought to acquire a new business and needed to raise funding quickly to pay the proposed purchase price. Odin signed a mandate letter with Astra under which Astra agreed to use its “best efforts” to arrange a loan facility for Odin “in form and substance satisfactory to Astra” (and, critically, not Odin). The mandate letter further provided that Odin would pay a £2m break fee to Astra if the transaction “fail[ed] to close for any reason”.  

During negotiations with Astra – including on the form of loan facility documentation – Odin obtained funds from other sources to complete the purchase of the new business without needing to put Astra’s loan facility in place. Odin refused to pay the break fee under the mandate letter, alleging that it was not liable because Astra had failed to use its “best efforts” to arrange the loan facility because:

  • It had placed undue pressure on Odin to sign the proposed form of loan agreement.
  • The financial covenants in the proposed loan agreement were onerous, unusual or unreasonable.

Astra’s contention was simple: Odin had failed to proceed with the facility proposed by Astra, so it was liable to pay the break fee. Astra applied for summary judgment.


Odin’s arguments failed both on the basis of contractual interpretation and as a matter of fact.

As to the allegations that Astra had placed undue pressure on Odin to sign the proposed form of loan agreement and that the financial covenants were onerous, unusual or unreasonable, the High Court found:

  • The time pressures were inherent in the nature of the proposed acquisition and the related proposed financing, and affected Astra as much as Odin.
  • The draft loan agreement had been the subject of detailed discussion between the parties.
  • Odin was advised by a highly experienced international law firm.
  • Odin had proposed changes to the relevant clauses in the draft loan agreement which had all been accepted by Astra, and Odin had not suggested at any point that the financial covenants were onerous, unusual or unreasonable.

The judge was not satisfied that Odin had made out the factual basis that underpinned its allegations. In any event, the judge concluded that even if Odin had formed the view that the financial covenants were not acceptable (because they were onerous, unusual or unreasonable), that was simply a risk which Odin had accepted under the terms of the mandate letter. There was no reason for the court to read any qualification into the mandate letter requiring any proposed facility to contain reasonable or usual or non-onerous terms. Astra’s obligation was to use its best efforts to produce a facility which was satisfactory to it as arranger. It was then up to Odin to decide whether to accept the terms (and to pay the break fee if it did not).


Market practice varies as to whose agreement is needed on the form of loan facility agreement. Here it was Astra’s only - in other situations, it is also the borrower’s. This decision reminds both lenders and borrowers of the importance of ensuring that the documents they sign contain only those terms they can accept and that the resulting risk allocation is one that they are comfortable with.

Contact our experts for further advice

Search our site