Agency Clauses

Summary

These Agency Clauses for a credit agreement are used to describe the role and rights of the administrative agent and other agents in a syndicated loan transaction. These clauses include practical guidance, drafting notes, and optional clauses. The administrative agent serves as the liaison between the borrower and the lenders for payments on the loans as well as notices, financial reports and other information provided by the borrowers. The collateral agent (which, in most cases, is the same bank serving as administrative agent) holds the security interest in the collateral for the benefit of all the lenders, and has the right to exercise rights and remedies against the collateral. In general, the administrative agent and collateral agent are agents of the lender parties, not the borrower. The one exception to this rule is that the administrative agent is considered the agent for the borrower for purposes of maintaining a register of the lenders for tax purposes. Note that these sample provisions contemplate a financing that includes the following elements: • A senior secured credit facility consisting of a term loan facility (that is funded in full at closing) and a revolving credit facility that will include a sub-facility for the issuance of letters of credit. • Agency roles for an administrative agent, collateral agent and issuing bank, each acting for a syndicate of lenders. • Collateral and guarantee support from the loan parties, generally including a group of the borrower's subsidiaries and the borrower's immediate parent entity. Typically, the financial institution acting as the administrative agent also serves as collateral agent for convenience and ease of administration. In addition, in two-lien secured credit facilities, often the same financial institution will serve as the agents for both sets of lenders. In these cases, there may be potential issues, including conflict of interest issues and other potential issues of consolidation into a single class in a post-bankruptcy filing scenario, which may cause lenders to require that different banks or financial institutions act in each capacity. The capitalized terms used in these clauses should be conformed to the defined terms in the relevant credit agreement. These clauses should be read in conjunction with the practice note Agents in Credit Agreements. For a full listing of key content covering a credit agreement, see Credit Agreement Resource Kit.