Structure of a facility agreement
Structure of a facility agreement

The following Banking & Finance guidance 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

This Practice Note discusses the usual components of a bilateral, committed facility agreement to a corporate borrower. It also assumes there is only one facility, though facility agreements often contain more than one facility. In some cases subsidiaries of the borrower will be parties to the facility agreement as guarantors. If this is the case, then many of the provisions in the facility agreement including, in particular, representations and warranties, undertakings and events of default will apply to these companies as well, and are considered in this Practice Note.

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 (the LMA facility agreement) (available to LMA members on the LMA website).

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).

Typical structure