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. This Practice Note is part of the Banking & Finance loan transaction toolkit and is intended as an introductory guide to practical points when drafting and negotiating a facility agreement. For a more general introductory guide to lending, see Practice Note: Lending—introductory guide.

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

  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.

For more information on parties, see Practice Notes: Types of borrowers and The finance parties.

Drafting the facility agreement

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

Finding a suitable