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GLOSSARY

Syndicated facility definition

Published by a LexisNexis Banking & Finance expert

What does Syndicated facility mean?

A facility under which lenders participate severally ie without liability should another lender fail to honour its obligations. The facility may start out as a bilateral loan but contain provisions enabling the original lender to transfer elements of the loan made to other participants. The facility is usually administered by the agent.

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Amending a facility agreement—checklist

Amending a facility agreement—checklist This Checklist sets out points for lawyers (external or in-house) acting for the lender(s) to consider when dealing with a borrower led amendment request. It focuses on requests for permanent amendments rather than one off waiver or consent requests. For information on these, see Practice Note: Waiver and consent requests. On a syndicated transaction, the borrower will normally make an amendment request in writing to the facility agent. This will typically contain the rationale for requesting the amendment and set out the clauses affected by the amendment, as well as consent thresholds and any snooze and lose provisions—the Loan Market Association (LMA) has published a helpful guide to the amendment process on a syndicated transaction. On a bilateral transaction, an amendment request from the borrower to the lender may be less formal. This Checklist makes reference to provisions in the Loan Market Association investment grade multicurrency term and revolving facilities agreement incorporating backward-looking compounded rates and forward-looking term rates (the LMA Investment Grade Facility Agreement). ...

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Key features of syndicated facilities

The difference between bilateral and syndicated loansA bilateral loan involves a borrower (and sometimes other companies in the borrower's group as guarantors and/or security providers) and a single lender.Where a single lender is unwilling or unable to advance the full amount required by the borrower, the borrower may look to two or more lenders for a loan to meet its needs. In a syndicated transaction, two or more lenders agree to make loans to a borrower on common terms which are set out in a single facility agreement entered into by all of the parties.Types of syndicationThere are three main types of syndicated loan:•underwritten deals where the arrangers guarantee to lend the entire commitment and subsequently look to syndicate the loan. If the loan is not fully subscribed, the underwriters will have to lend the rest of the money themselves•best-effort deals are not underwritten by the arrangers but they simply undertake to do their best to find other lenders to provide the total commitment. The borrower therefore does risk not...

Bilateral, syndicated and club arrangements

One of the key features used to categorise loans is the number of lenders involved. A loan involving one lender is known as a 'bilateral loan'. A loan involving more than one lender may be a 'syndicated loan' or be referred to as a 'club loan'. Multiple lenders can also be indirectly involved in the same loan by way of sub-participation.This Practice Note explains the key features of bilateral loans, syndicated loans and club loans.Bilateral loansA bilateral loan is a loan involving a single lender. There may be a single borrower or multiple obligors involved, ie the borrower and other companies in the borrower's group as guarantors and/or security providers. Bilateral loans are normally used for loans of relatively small amounts and where less complex financing arrangements are required (eg a simple overdraft or term loan). Where the borrower requires a larger loan, a single lender may be unwilling or unable to advance the full amount required by the borrower. In these cases, a syndicated or club loan may be...

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Ireland—Director’s certificate for a bilateral loan: borrower

Director's certificate This is a Precedent director’s certificate for use by the borrower of a bilateral facility. . What is a director’s certificate? Delivery of an original director's certificate is usually one of the conditions precedent in a facility agreement. Conditions precedent are the conditions that need to be fulfilled for funding to occur. They are included to provide the lender with a mechanism to ensure that, before funds are lent to the borrower: • certain documentary matters are dealt with, and • certain factual circumstances exist Documentary conditions precedent The documentary conditions precedent to lending are usually listed in a schedule to the facility agreement. ). As well as an original director’s certificate, documentary conditions precedent typically include certified copies of certain documents such as: • the constitutional documents and register of members and register of directors of the borrower, any guarantor and any party providing security for the transaction (a third-party security provider) • the board resolutions of the borrower, any guarantor and any third-party security...

Arrangement fee letter: for use with a syndicated facility agreement in an acquisition finance transaction

Arrangement fee letter: for use with a syndicated facility agreement in an acquisition finance transaction [To be printed on the headed paper of the arranger[S]] [insert date] To: [insert full name and address of [parent]] Dear [insert full name of parent] We refer to the facilities agreement dated [insert date of facility agreement] between [insert full name of the parent] as the Parent, the subsidiaries of the Parent listed in [insert Schedule containing borrowers‘ details] as Original Borrowers, the subsidiaries of the Parent listed in [insert Schedule containing guarantors‘ details] as Original Guarantors, the financial institutions listed in [insert Schedule containing lenders’ details] as Original Lenders, [insert full name of arranger[s]] as the Arranger, [insert full name of facility agent] as the Agent, [insert full name of security agent] as Security Agent, [insert reference to any other parties] as amended, novated, supplemented, restated or replaced from time to time in accordance with its terms (the Facilities Agreement). 1 This is the Fee Letter setting out the arrangement fee payable by...

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How can I ensure security and guarantees remain effective on a refinancing?

How can I ensure security and guarantees remain effective on a refinancing? Why would my client want to leave existing security and guarantees in place? On a refinancing, all indebtedness of a borrower being refinanced (Refinanced Indebtedness) is repaid, unutilised commitments cancelled, and all related credit support (guarantees and security) in respect of the Refinanced Indebtedness falls away by operation of law, or (more often in practice) is otherwise released. This enables the borrower and credit support providers to grant fresh credit support to the incoming lender or lenders, or its or their agent or trustee. However, a borrower would often prefer to be able to leave in place the existing credit support arrangements, in order to save the time and expense of creating and perfecting new credit support arrangements. Incoming lenders also benefit from such an approach, as they may be able to take advantage of ‘hardened’ arrangements which were put in place prior to the commencement of the suspect period. For more information on hardening periods and claw-back...

How might the European Commission proposal for new conflict of law rules for assigned claims impact the secondary loan market?

How might the European Commission proposal for new conflict of law rules for assigned claims impact the secondary loan market? Summary This Q&A refers to the European Commission’s proposal for a Regulation on the law applicable to the third-party effects of assignments (the Proposal) published on 12th March 2018, which could have an impact on the market for trading participations in syndicated and bilateral loans. Both of the Loan Market Association (LMA) and the City of London Law Society made representations asking for the Proposal to be shelved or at least amended to accommodate current market practice in the secondary loan market. Their representations are available on their respective websites. It is fair to say that in its original form the Proposal would have disrupted the secondary loan market by making due diligence on the part of a buyer much more complicated for the reasons given below. The UK indicated on 9 July 2018, shortly after publication of this Q&A, that it would not opt in...

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Banking & Finance weekly highlights—23 May 2019

This week’s edition of the Banking & Finance highlights includes (1) the EU committee releasing a report on the implications of Brexit for UK-EU surface transport, (2) the LMA publishing a guidance note on US QFC Stay rules, and (3) ISDA launching benchmarks fallback consultations

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