Whether it’s facilitating communication among syndicated loan parties, processing a loan trade, tax reporting, or maintaining the loan’s books and records, the administrative agent is a powerful resource for lenders and borrowers. Administrative agents are typically organized and detailed by nature, which means handling complexity is one of their core competencies.
Timely Communication Keeps All Parties Informed
The administrative agent acts as the central communication point for the parties to the credit agreement. The borrower is required to provide financial information and other compliance materials to the administrative or loan agent, which is then distributed to lenders by the administrative agent. The borrower may also send the loan agent other items it would like sent to the lenders, such as a request for a waiver or amendment to the credit agreement. These materials are best disseminated by the administrative agent to the lenders by using an online data platform. The administrative agent will also communicate with the borrower and lenders regarding routine matters such as debt service payments, interest rates, and borrowings.
The efficiency of administering a syndicated loan is greatly increased by working through an administrative agent. A good administrative agent will make communicating findings and responding to inquiries a priority and respond with the utmost timeliness.”
One of the main responsibilities of the administrative agent is to maintain the loan register. The register is a ledger that sets forth the name and loan commitment of each lender. The register also contains the principal, interest, and fees owed to each lender. The borrower and lenders may retain their own records, but the administrative agent is charged with maintaining the official register of the loan and can then address any questions from all parties.
Admin Agents Facilitate Accuracy in Loan Trade Processing
To settle a loan trade, the buyer and seller will enter into an assignment and assumption agreement that specifies many factors, including the loan and amount being traded. The executed assignment and assumption will then be submitted to the administrative agent for processing. It is necessary for the administrative agent to be involved in settling loan trades to ensure payments are accurate, and the register is updated with the correct information. Subject to obtaining any necessary consents, the administrative agent will acknowledge the assignment and assumption, update the register to reflect the trade, and return the acknowledged assignment and assumption to the parties thereby confirming that the register has been updated to reflect the assignment.
It is necessary for the administrative agent to be involved in settling loan trades to ensure payments are accurate, and the register is updated with the correct information.”
Use an Admin Agent for Tax Reporting
A great benefit of the administrative agent is their role in tax reporting. Due to their work making payments, they also act as a withholding agent under the Internal Revenue Code. As a withholding agent, the administrative agent is required to withhold any funds subject to withholding tax. The administrative agent also needs to report certain payments, including interest payments, to the borrower, lenders and the Internal Revenue Service. The administrative agent collects W-8 or W-9 tax forms from the borrower and each of the lenders to withhold taxes and perform tax reporting correctly.