Sometimes, lenders find that credit facilities are simple to administer themselves when there are fixed-rate terms and few payment periods. But often, deal parties agree to more complex credit structures—perhaps having multiple lenders involved or with complex rate schemes—that are more difficult to manage with in-house resources. When deals become distressed, the deal parties might be better served by an independent third-party administrative agent. Administrative agent duties significantly increase in a distressed situation and a lender can quickly find themselves in a situation where the needs of the credit facility are greater than their in-house capabilities. Lenders often find their teams spending too much time managing credits rather than finding the next deal.
That’s where an independent third-party administrative agent can help. The administrative agent introduces convenience and efficiency for both lenders and borrowers. As a single point of contact for all credit facility issues and for day-to-day administration, the administrative agent manages communications between the borrower and the lending group as well maintaining the registrar, processing assignments, and preparing the required notices. Should a challenge, dispute or default situation arise, the administrative agent would look to the majority lenders to provide direction on how to proceed and execute on their direction.
The administrative agent introduces convenience and efficiency for both lenders and borrowers.
Making the decision to use a third-party administrative agent, collateral agent, or sub-agent on your next deal provides many benefits, as third-party agents typically specialize in that service with years of experience and well-tested procedures and systems. When you decide to partner with an independent administrative agent, here are five things to expect when you start the partnership.
Steps in the Loan Administration Process
Once the decision is made to bring on an independent administrative agent, the lender can prepare for a series of activities that will ensure an orderly transition and the successful administration of the loan.
- Pricing of Loan Agency Services
Look for your professional administrative agent to assess the loan and provide pricing for its administrative services. The administrative agent will identify specific details such as the number and types of facilities, frequency of payments, rate structure, number of lenders involved, type of collateral, as well as determine their role of named administrative agent or sub-agent with the deal parties.
- Relationship Manager
A relationship manager will be assigned to be the main point of contact for the lenders and borrower through the entire process leading up to closing, and to ensure diligent execution of all loan administration duties for the credit facility throughout the life of the loan.
- Reviewing the Credit Agreement
Once all parties and roles are defined, the borrower, lender(s), and administrative agent convene with their attorneys to review the credit facility in detail. An experienced administrative agent and its attorney will be looking at the mechanics of the credit facility to ensure the loan can be effectively executed per the terms in the credit facility—this does not include a review of the negotiated terms or economics of the facility. The attorney will be sensitive to time and fees in the review process.
- Closing the Credit Facility
Once the terms are reviewed and agreed upon, the closing date will be set. As soon as signature pages are released from escrow, the lenders will execute wire transfers to the administrative agent. The administrative agent will then review and confirm the amount, wiring the loan proceeds to the borrower net of all fees and expenses.
- Final Details and Establishing a Data Site
As part of the closing process, the lenders will provide administrative details such as contact information for notices and tax information for reporting purposes. The administrative agent will establish a data site with convenient access for lenders and borrowers to review all documents and notices.
On an ongoing basis, the administrative agent will ensure the borrower has the necessary information to be fully informed and to send on-time payments to the lender(s) involved through the agent’s bank account. The administrative agent receives information from the borrower such as financial statements and compliance certificates and will provide those to the lender group for review.
Regional Managing Director, Loan Agency Business Development tel:732-670-9892
Michael is the regional managing director of Loan Agency Business Development for SRS Acquiom. Michael has over 15 years of experience providing agency and restructuring solutions to some of largest investment banks, credit funds, law firms, and hedge funds in the world.
Before joining SRS Acquiom in 2019, Michael was a Senior Vice President at a provider of agency, escrow, and trustee services, where he helped establish the U.S. office. Before that, Michael spent eight years at Bloomberg LP covering the firms credit clients across the U.S., Canada, and Latin America.
Michael received his BS in Criminal Justice from Northeastern University.