Administrative Agent Credit Agreement
In addition, the participant may have the right to prevent any substantial economic change in the credit contract. If the lender gives such a veto to the participant, the participant may block a complete restructuring of the facility, regardless of the amount of the loan share. Since the participation agreement must be in accordance with the terms of the credit agreement, it is advisable for the lender to carefully analyze the terms of the credit agreement to ensure that there are no inconsistent provisions. The syndicated loan is a useful tool for administrative officers and non-agent lenders. The syndicated loan allows the administrator (who typically organizes the syndicated loan facility) or a group of lenders to access larger credit facilities that might otherwise exceed the internal and external credit risk limits of the lender or individual lender. By distributing the credit facility among a group of lenders, instead of committing to finance the entire credit facility, the lender is able to maintain its relationship with its borrower and provide a significant amount of resources, while remaining within its credit risk limits and spreading the risk among the group of lenders. In addition, the lender, as an administrative agent, benefits from the imposition of additional fees (e.g. B intermediation fees, administrative and management fees). The lending agency is a term used in capital markets to describe certain types of loans that are commonly referred to as syndicated or bilateral loans. In both cases, a business, also known as a « borrower, » must provide financing. Perhaps the company acquires a competitor, builds a new data center, buys an airplane, needs working capital or has another legal purpose for the funds. In the case of a syndicated loan, the amount required by the borrower to achieve its objective is too large or risky for a single financial institution to lend the entire amount. To reduce credit risk, a consortium of lenders or consortia – investment banks, institutional investors, hedge funds and other financial companies – will co-finance the loan.
In the case of a bilateral loan, the amount borrowed is generally less than that of a syndicated loan and only one lender will finance the entire amount. The specific terms of the financing are recorded in a credit agreement negotiated between the borrower, lenders, agents and other parties to the loan.