Structure of a facility agreement

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

  • Structure of a facility agreement
  • Typical structure of a bilateral facility agreement
  • Provisions relating to the facility
  • Mechanics of the facility
  • Costs, fees and other payment obligations
  • Representations and warranties
  • Undertakings (covenants)
  • Events of default
  • Boilerplate provisions
  • Schedules
  • More...

Structure of a facility agreement

This Practice Note is intended as an introductory guide to facility agreements (loan agreements) for those new to lending transactions. It discusses the usual components of a bilateral, committed facility agreement to a corporate borrower and links out to further information.

For an introductory guide to lending transactions, see Practice Note: Lending—introductory guide.

Where appropriate, this Practice Note highlights relevant provisions in Precedent: Facility agreement (term loan): single company borrower—bilateral—with or without security or a guarantee and the Loan Market Association (LMA) investment grade multicurrency term facility agreement with/without observation shift (the LMA facility agreement) (available to LMA members on the LMA website). This is the version that refers to risk-free references rates such as SONIA and SOFR rather than LIBOR and is the version that should be used in light of the transition away from LIBOR—see Practice Note: LIBOR transition—FAQs and glossary.

The LMA has a series of helpful user guides in the Documents & Guidelines section of its website which provide guidance on its documentation. Additionally, the Association of Corporate Treasurers (ACT) Borrower’s Guide to the LMA’s Investment Grade Agreements (2017) contains useful guidance on LMA documentation. Registration at ACT’s website is necessary to access their guidance.

For information on drafting and negotiating a facility agreement, see Practice Note: Drafting and negotiating the facility agreement (part of the LexisPSL loan transaction toolkit).

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