The security agent and security trust provisions
The security agent and security trust provisions

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

  • The security agent and security trust provisions
  • Introduction
  • Trust
  • Duties of the Security Agent
  • Rights and powers of the Security Agent
  • Protections and exclusion of liability
  • Resignation and replacement of the Security Agent
  • Parallel debt
  • Confidentiality
  • Variation of statutory duties and powers

Introduction

In a syndicated loan transaction, the security agent (sometimes also known as the security trustee) (the Security Agent) will hold the transaction security on trust for the creditors as a whole, the membership of which can vary from time to time. These creditors are typically the lenders and other secured creditors (the Secured Parties) within a syndicated loan arrangement. The trust structure avoids the need for security to be:

  1. granted separately to each of the creditors, which can be expensive and time consuming, and

  2. retaken or re-registered (and hardening periods reset) should a Secured Party change as a result of a loan transfer. For more on hardening periods, see Practice Note: Antecedent transaction claims by an office holder in liquidation or administration. For more on loan transfers, see Practice Notes: Key issues in loan transfers and Transferring a loan by novation—Disadvantages of novation.

The Security Agent is the main point of contact and acts as a conduit between the borrower or security provider and the Secured Parties. It acts as the single entity responsible for the administrative aspects of the security (eg holding title deeds relating to the secured property) and for making distributions to the other secured creditors following any enforcement.

The specific duties and functions of the Security Agent will be set out in detail in