Competitive Bid Loan Promissory Note
(Credit Agreement)

Summary

This template is a competitive bid loan promissory note to be used in connection with an investment grade credit agreement that includes a competitive bid loan facility. This template includes practical guidance and drafting notes. A promissory note is an instrument that evidences the indebtedness of a borrower to a lender funded under a credit agreement. Promissory notes are not necessary in syndicated loan transactions, but certain lenders prefer physical evidence of their loan as an acknowledgement by the borrower of its obligation to repay that specific lender. A competitive bid loan facility is a feature that can be added to a credit agreement to provide additional pricing flexibility for investment grade borrowers. Competitive bid loans usually take the form of a sub-facility under a revolving credit facility that allow the borrower to solicit bids from its lenders to provide loans on maturities and interest rates different than those applicable to the standard revolving loans. The lender that offers the lowest interest rate will be selected by the administrative agent to make the competitive bid loan. This allows a borrower to obtain more favorable pricing than initially negotiated for the revolving loans and provides the lenders a chance to provide a larger portion of loans than their pro rata share of the revolving facility (and earn a larger share of the resulting interest payments). Unlike a traditional revolving loan, competitive bid loans often have a set duration. At the end of the term, the competitive bid loan must be repaid of refinanced with a new competitive bid loan resulting from a new bidding process. Conform the capitalized terms to the defined terms in the relevant credit agreement. For an example of a non-negotiable promissory note that contains a full set of covenants, see Promissory Note (Construction Loan). For an overview of competitive bid loan provisions and a discussion of recent market trends in publicly filed credit agreements, see Market Trends 2022/23: Competitive Bid Loan Provisions. For a full listing of content relating to promissory notes for use in various practice areas, see Promissory Notes Resource Kit (Small to Mid-Sized Law).