A revolving credit facility is a type of loan in which a corporate borrower is granted access to a pool of funds for a specified period of time, typically with a fixed limit, which can be drawn down and repaid multiple times. This type of loan is particularly useful for businesses that have varying cash flow needs, as they can draw on the facility when required and repay the outstanding amount at a later date.
In a syndicated revolving credit facility, a group of banks, known as the syndicate, provides the loan to the borrower. The syndicate is typically led by a mandated lead arranger, who is responsible for arranging the loan and coordinating with the other lenders. However, the day-to-day administration of the facility is handled by an agent.
The agent plays a critical role in the management of the revolving credit facility. They are responsible for performing a wide range of functions, including maintaining the loan account, monitoring compliance with the terms of the agreement, processing drawdowns and repayments, and distributing interest and principal payments to the lenders. The agent also acts as a point of contact between the borrower and the lenders, handling any queries or issues that arise during the term of the facility.
To ensure that the agent has the necessary authority to perform these functions, a number of documents are typically used to appoint them. These include the loan agreement, which sets out the terms and conditions of the facility, and the agency agreement, which sets out the specific responsibilities of the agent. The agency agreement will typically include provisions regarding the fees payable to the agent, the standard of care expected of them, and the circumstances in which they may be replaced.
In addition to these core documents, the syndicate may also use ancillary documents to provide further guidance and instructions to the agent. These may include a letter of direction, which sets out specific instructions relating to the day-to-day administration of the facility, and a security trust deed, which establishes the security that is being provided to the lenders in support of the loan.
Overall, the agent plays a vital role in ensuring the smooth operation of a revolving credit facility. Their expertise and experience enable them to manage the loan account effectively, provide timely and accurate information to the lenders, and ensure that the borrower is meeting their obligations under the loan agreement. By appointing a trusted and competent agent, the syndicate can be confident that the facility is being managed in a professional and efficient manner.
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About the author
Sabbir Rahman is Managing Director of Langdon Capital and a Partner at Bridging Funding. He has held prior roles with Morgan Stanley, Lazard and Barclays Investment Bank. He has executed over £60 billion in notional value of transactions across financing, M&A and derivatives with global corporates, private equity funds and financial sponsor groups.
About Langdon Capital
Langdon Capital provides in-house transaction services to C-suites and Boards of publicly-listed and PE-backed businesses during the negotiation, execution and due diligence of corporate finance and capital markets transactions and senior interim resourcing solutions across finance, treasury, strategy and corporate development | contact info@langdoncap.com | visit www.langdoncap.com
About Bridging Funding
Bridging Funding is a private credit fund engaged in principal lending of commercial property bridging loans in the UK and select South-East Asian markets. We lend between £200k and £20m per transaction. As a private credit fund, our credit sanctioning process is leaner and more flexible than lenders funded by bank capital | contact sr@bridgingfunding.com | mention code “Langdon” for preferential rates | visit www.bridgingfunding.com
This is not financial advice or any offer, invitation or inducement to sell or provide financial products or services or to engage in any form of investment activity.
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