Facility Agent - FAQs with Nicola Laming, Head of Loan Agency

What is a Facility Agent?

A Facility Agent is an entity appointed to act as the primary point of contact between the borrower and the lenders on a syndicated loan facility. The agent administers the loan on behalf of the syndicate. 

What are the responsibilities of a Facility Agent?

Whilst the Facility Agent’s role is deemed to be purely mechanical and administrative in nature, in reality much more is expected and the Agent has a critical role to play throughout the life of the loan outside of their core responsibilities of Loan Servicing, Compliance Monitoring and Distribution and Amendments & Waivers.

Agents are often called upon to provide guidance and expertise, especially when deals close and when refinancing. They frequently go over and above to ensure that conditions within the agreement are adhered to. 

Why use a Third-Party Facility Agent?

There are many reasons and scenarios where using a Third Party Facility Agent such as Law Debenture, rather than a syndicate member, makes sense.

Independence: All Facility Agents (irrespective of whether they are involved in the deal more broadly) are obligated to act independently of other parts of their organisation which can at times be a challenge for traditional agent banks.

Using a 3rd party like Law Debenture ensures there are no conflicts of interest which can arise (or be perceived as arising) especially when managing loans across the capital structure. This ensures continuity across the life of the loan with all the benefits that brings, such as detailed knowledge and understanding of the deal, strong relationships with Borrowers and Lenders and reduced likelihood of the agent needing to resign due to a change in the broader strategy of an organisation .

Expertise: In large organisations, several teams will often work across a transaction with each one often not being aware of the roles of other teams and the impact of their part of the process on the bigger picture. Here at Law Debenture we have a team of  specialists with decades of experience working on our agency team, who are  able to understand and support even the most complex of transactions. They have oversight of all aspects of a deal (including onboarding, KYC and doc review) which allows not  only quick turnaround times and pragmatic decision making but also the ability to adapt swiftly to the constantly evolving nature of deals. Our expertise allows concepts to be easily understood, the correct questions to be asked and appropriate solutions agreed upon. 

Efficiency: Dedicated third party agents are able to provide a level of efficiency that is often hard to match in larger multi product organisations. Our single points of contact for all aspects of deal onboarding and subsequent servicing post-closing ensures turnaround times are greatly reduced and a consistent level of support across all aspects of the deal. 

What system do you use for facility agency?

Most agents use specialised loan administration platforms to manage calculations, notices, and lender positions securely. Some of these legacy systems at times struggle to keep pace with the constantly evolving nature of the market and the vast variety of product types. Here at Law Debenture we have recently onboarded a web based system that will allow us the flexibility to support bespoke deals and adapt quickly to meet the needs of the market. 

What are the benefits of a facility agent for borrowers and lenders?

The key benefit is the lack of conflict from having a 3rd party agent the deal, with the continuity that provides for all parties. The single point of contact is hugely beneficial – often it can be confusing for Lenders and Borrowers to have multiple points of contact in the same organisation resulting in information and questions being misdirected or misunderstood, leading to delays and confusion.

For Lenders in particular, having a third party with no competing priorities agent a deal provides reassurance that all lenders will be treated equally.  

Another key benefit is enabling MLAs to scale their businesses without adding resources.  Anyone who has worked in a large organisation understands the challenges around hiring keeping pace with business needs so it is useful to be able to use a third party as and when necessary to plug that gap. It also allows limited resources to focus on core deals and clients when needed. At Law Debenture the role of successor agent has proved invaluable to clients wishing to free up resources to focus on strategic projects and deals.  

Can Law Debenture act as Facility Agent and also act as Security Agent?

Yes. We offer a full suite of Agency services as well as Facility Agency. In our experience Borrowers and Lenders see a huge benefit to having the same organisation take on both the Facility and Security Agent roles and actively pursue that option.  

How much does a Facility Agent cost?

Typically a Facility Agent is paid through an annual agency fee, plus additional fees for onboarding, amendments, waivers, or complex restructuring where appropriate. Its extremely important that an agent is able to fully assess the support required for each deal and price accordingly. Many times you see agents not fully appreciate the resource requirement for deals and then look to either renegotiate fees or retire from the role at some point post-closing. Having a team of people, like the team here at Law Debenture, who can accurately assess each deal from the outset removes the possibility of this happening.  

How have you seen the Third Party Agent role evolve?

Over recent years there has been a significant change in attitude to the presence of Third Party Agents in the market and an acknowledgement of the benefits they can bring and the value they add. 

The wide variety of third party agents in the market has ensured that there is a solution for everyone and highlighted the value they bring to a busy and constantly evolving market  

What does the future look like for Third Party Agents?

The future looks bright. We are seeing a more diverse range of investors actively looking to use a third party agent and some planning business ramps ups specifically around using third party agents. 

For more information email jessica.dennis@lawdeb.com