Representing Co-Lenders in Syndicated Credit Facilities

Description

In most loan syndications, the loan agreement, promissory note, and other ancillary documents are negotiated and executed by the lead lender, who, as an agent, sells portions of the loan in the secondary market. Co-lenders may not have a real time opportunity to review or comment on the primary loan documents, so their focus will likely be reviewing existing loan documents and seeking additional protections under a co-lender agreement.

Loan features of particular importance to co-lenders include waterfall and pro-rata sharing provisions and how those provisions operate under pre- and post-default scenarios and sacred rights, which may only be amended by agreement of all co-lenders. Other factors, such as the borrower's ability to incur additional debt, or the ability of the agent to remove co-lenders or add new lenders, could significantly affect a co-lender's position in the deal.

The co-lender agreement must set forth which actions the agent may take without the co-lenders' consent and which actions require a majority or unanimous consent. Co-lenders with a majority stake in the loan may have a different view than minority lenders when negotiating these consent provisions. The documents should also spell out the reporting obligations of the agent concerning the borrower and the collateral.

Listen as our authoritative panel discusses the key concerns of co-lenders in a syndicated credit facility.