Letter of Credit Clauses
(Credit Agreement)

Summary

These letter of credit clauses are usually contained in Article II of a credit agreement in a typical syndicated loan transaction. These clauses include practical guidance, drafting notes, and optional clauses. Note that these clauses contemplate a financing that includes the following elements: • A senior secured credit facility consisting of a term loan A and a term loan B facility, both funded in full at closing • Agency roles for each of an administrative agent, collateral agent and issuing bank, 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 These sample provisions do not include certain borrower refinancing and add-on options that have become common in credit agreements, including options for incremental facilities, refinancing facilities, loan buybacks and amend and extend transactions. For templates covering these provisions, see Incremental Facility Clauses (Credit Agreement), Refinancing Amendments Clauses (Credit Agreement), Borrower Loan Buybacks Clauses (Discounted Voluntary Prepayments) (Credit Agreement) and Amend and Extend Clause (Credit Agreement). The capitalized terms used in these sample provisions should be conformed to the defined terms in the relevant credit agreement. These clauses should be read in conjunction with the practice notes Letter of Credit Facilities in Financing Transactions and Structuring a Financing Transaction. Also see Letters of Credit: Purpose and Types and Letters of Credit: Parties and Documentation for further practical guidance. For a full listing of key content covering letters of credit in financing transactions, see Letter of Credit Resource Kit. For a full listing of key content covering a credit agreement, see Credit Agreement Resource Kit.