Overview

Delos AI Inc. has build an AI engine that offers 100% accuracy on calculating complex legal clauses that blend math and logic problems. Read more about it here. One example of such clauses are debt covenants in loan agreements. A common occurrence for PE-funded companies, those debt covenants require recurrent calculations (every month or quarter). Their complexity means that many debt funded companies and their lawyers struggle to calculate them correctly. The process is time consuming and error prone.

However, their nature - mixing math and logic - makes them perfect for Delos AI’s engine.

Link to the demo: Debt Covenant Demo

Use Case Details

For this demo we're interested in calculating the "Levarage Ratio". A common debt covenant used in loan agreements. It's purpose is to ensure the company is not taking on too much debt in comparison to its EBIDTA.

To illustrate the use case details we created a mock agreement with 3 key provisions:

a rule defining the Leverage Ratio - limiting it at 5.00:1.00 of debt to EBIDTA
a rule defining the EBIDTA for the given borrower
a rule defining the Total Debt for the given borrower

The agreement itself is a mock one - containing just those 3 provisions. You can find it here. However the provisions themselve are based on real agreements and definitions found in loan agreements.

Agreement Provisions

Leverage Ratio

The Leverage Ratio provision in question is as follows:

Item	Value
Net Income	$7,500,000
Interest Expense	$1,000,000
Taxes	$1,800,000
Depreciation	$600,000
Amortization	$400,000
Non-cash Charges	$250,000
Extraordinary Charges	$150,000
Transaction Fees	$200,000
Modification Fees	$50,000
Administration Fees	$120,000
Permitted Acquisition Fees	$300,000
Income Tax Credits	$-100,000
Non-cash Income or Gain	$-80,000
Life Insurance Proceeds	$50,000
Extraordinary Gains	$200,000

Item	Value
Loans	$50,000,000
Notes	$10,000,000
Debentures	$5,000,000
Other Obligations for Borrowed Money	$2,500,000
Capital Finance Leases Present Value	$3,000,000
Undrawn Face Amount of Letters of Credit and Guarantees	$4,000,000
Unreimbursed Drawn Amounts on Letters of Credit and Guarantees	$1,000,000
Deferred Purchase Price	$750,000

Use Case: Calculating Debt Covenant Compliance with Delos One

Overview

Use Case Details

Agreement Provisions

Leverage Ratio

EBIDTA Definition

Total Debt Definition

Delos Platform

Step 1 - Uploading agreements

Step 2 - Creating the Engine

1 Agreement -> 1 Agent -> Multiple Procedures Covered:

Delos Semantic Parsing Algorithm automatically converts agreement clauses into a logical format:

Step 3 - Adding Data Inputs

Step 4 - Using the Agent

Scaling to other clauses

Conclusion

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