October 22, 2019

Issues for Administrative Agent to Consider

By Mayer Brown

In a typical syndicated credit facility, one of the lenders (or an affiliate of a lender) acts as administrative agent (the “Administrative Agent”) for the lender group. There are several reasons for a lender to seek the role of Administrative Agent, including agency fees, league table recognition and a deeper relationship with the borrower or sponsor.

Fund financing credit facilities are typically senior secured facilities, so the role of the Administrative Agent also relates to pledged collateral. The role includes responsibilities that may give rise to potential liability, and lenders should understand these risks. :contentReference[oaicite:0]{index=0}

Most banks that regularly participate as Administrative Agent use form or template documents designed to address common issues. However, lenders may encounter unfamiliar documentation in situations such as:

• when a lender moves from a syndicate member role to Administrative Agent;
• when a borrower requires use of another bank’s precedent documents; or
• when a bilateral facility is converted into a syndicated facility.

The increasing participation of nonbank lenders and new market entrants has also led to more aggressive negotiation of Administrative Agent protections. :contentReference[oaicite:1]{index=1}

Role of the Administrative Agent

The Administrative Agent’s role is primarily one of convenience and efficiency. It provides borrowers with a single point of contact for day-to-day administration of the credit facility, including borrowing and repayment.

The Administrative Agent also facilitates the creation and perfection of security interests on behalf of the lender group. While acting for the benefit of lenders, the Administrative Agent’s authority and limitations are defined by the credit agreement. :contentReference[oaicite:2]{index=2}

Typical Administrative Agent Provisions

Administrative Agent provisions in credit agreements—often based on Loan Syndications and Trading Association (LSTA) forms—generally include the following:

• Appointment and Authority; Delegation of Duties
  The lenders formally appoint the Administrative Agent and...