Loan agency is a term used in capital markets to describe certain types of loan financing, commonly referred to as syndicated or bilateral loans. In both instances, a company, also referred to as a “borrower”, needs to secure financing. Maybe the company is acquiring a competitor, building a new data center, purchasing an aircraft, needs working capital or has another legal purpose for funds. In a syndicated loan, the amount needed by the borrower to achieve its goal is too large or risky for a single financial institution to loan the full amount itself. In order to reduce the lending risk, a consortium of lenders or syndicate – investment banks, institutional investors, hedge funds, and other financial entities – will jointly fund the loan. In a bilateral loan, the amount borrowed is typically less than a syndicated loan and a single lender will fund the entire amount. The specific terms of the financing are documented in a credit agreement, which is negotiated amongst the borrower, lenders, agents and other loan parties.
In the credit agreement, an administrative agent is often appointed to facilitate administerial tasks of the loan and act as an intermediary between the borrower and lender(s). An administrative agent’s duties typically involve maintaining the loan register, setting rates, calculating interest, sending payment notices, facilitating borrowings, processing lender trades, collecting compliance materials from the borrower and much more. If the loan is secured by collateral, a collateral agent will receive security interests in the pledged collateral. Typically, the collateral and administrative agents are the same entity. These roles, while administrative in nature, are non-fiduciary and in the event any discretionary action is required, the agent acts upon the direction of the majority lenders.
SRS Acquiom provides loan agency services, and routinely acts as administrative and collateral agent for both syndicated and bilateral loans. Whether you’re a borrower, lender, or a professional representing one, the SRS Acquiom loan agency team has the experience and technology to service your next transaction.