Finance party default—facility agent
Finance party default—facility agent

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

  • Finance party default—facility agent
  • Facility agent's role—key areas of concern
  • Protection against the credit risk of the facility agent
  • Dealing with a facility agreement which has an impaired facility agent

In times of financial crisis, it is not just borrowers who are under financial pressure. Finance parties (eg lenders, facility agents and security agents) are also at risk of getting into financial difficulty. Facility documents have developed over time (particularly as a result of the financial crisis which began in 2008) to deal with issues raised by the credit risk of the finance parties.

Facility agents play a crucial role in the mechanics and administration of syndicated facility agreements. If they don't perform their duties, both the lenders and the borrower can be adversely affected.

This Practice Note explains the key issues involved where a facility agent is in financial difficulty, including:

  1. the key areas of concern in relation to the facility agent's role in syndicated facility agreements

  2. the key elements of common provisions in facility agreements which are included to deal with the credit risk of the facility agent, and

  3. points to note when dealing with a facility agreement which has an impaired facility agent

For information on defaulting lenders, see Practice Note: Finance party default—lenders.

Where appropriate, this Practice Note highlights relevant provisions in the Loan Market Association (LMA) senior multicurrency term and revolving facilities agreement for leveraged acquisition finance transactions (LMA leveraged facilities agreement) (available to LMA members on the LMA website).

The LMA's user guides (available in the 'Documents &