Drafting and negotiating the facility agreement
Drafting and negotiating the facility agreement

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Drafting and negotiating the facility agreement
  • Parties
  • Drafting the facility agreement
  • Negotiating the terms
  • Key syndication principles

This Practice Note covers the typical structure of facility agreements and the key terms and provisions that will be included. It examines the process of preparing the first draft of the document and negotiating the key terms from the perspective of the borrower and the lender. It also looks at the key syndication principles that will need to be considered when drafting a syndicated loan agreement.

Parties

The parties to a bilateral facility agreement will be:

  1. the borrower(s)

  2. any guarantors (where the terms of the guarantee are within the facility agreement), and

  3. the lender

Key parties to a syndicated transaction will be:

  1. the borrower(s)

  2. any guarantors (where the terms of the guarantee are within the facility agreement)

  3. the facility agent, known as the agent

  4. the arranger(s)

  5. the security agent, as agent and trustee, where the transaction is secured and there isn't a separate trust deed, and

  6. the lenders

There may be additional parties depending on the transaction, eg an issuing bank where letters of credit are being issued.

Drafting the facility agreement

The lender's lawyers will usually prepare the first draft of the facility agreement.

Finding a suitable precedent

When looking for a suitable precedent facility agreement, it is important to consider:

  1. the type of loan facility involved (see Practice Notes: Overdrafts, term loans and revolving credit facilities

  2. what kind of transaction