Mandate letters in syndicated loan transactions
Mandate letters in syndicated loan transactions

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

  • Mandate letters in syndicated loan transactions
  • The purpose of mandate letters
  • Content of mandate letters

The purpose of mandate letters

Mandate letters are used in syndicated transactions to set out the terms of engagement between the arranging bank or banks (known as Mandated Lead Arrangers (MLAs)) and the borrower, under which the MLAs agree to arrange financing for the borrower. The mandate letter will set out the proposed terms of the financing and authorise the MLAs to syndicate the loan on an exclusive basis.

For more information on the role of the MLAs in a syndicated transaction, see Practice Note: The finance parties—Arranger.

The mandate letter is usually the first document to be agreed on a syndicated transaction and it initiates the syndication process.

There are two types of mandate letters:

  1. underwritten—where the combined commitments of the MLAs are sufficient to fund the whole amount of the proposed facility and the MLAs agree to fund their respective proportions of the facility even if they do not find any other participants, and

  2. best efforts—where the MLAs agree to use their best efforts to achieve a successful syndication. If the MLAs cannot find enough lenders to participate in the transaction, they are not obliged to fund any shortfall in the facility amount

The Loan Market Association (LMA) has precedent underwritten and best efforts mandate letters which members can access on the LMA website. For more information on