The importance of the facility agent and security trustee

By Rebecca Percossi

Executive Managing Director, APAC

Since opening Trimont’s Sydney office 5 years ago we have observed a notable increase in foreign banks, investment banks and credit funds seeking the services of agency and trustee services from specialist third-party institutions.

Independent agency and trustee organisations have established themselves as a vital intermediary, particularly on larger transactions, which are typically funded by lender clubs or syndicates. In addition to this, with the emergence and increase in credit funds these organisations have played an important role in assisting such lenders where they would not necessarily have had the capacity to administer and manage their loans.

What is a facility agent?

A facility agent is the primary point of contact between any lender and borrower, whose main role is to manage the flow of transactions, information and documentation in an impartial manner. In addition to bringing an advanced levels of expertise and organisation to their lender clients, the agent provides a level of comfort.  Whilst appointed by the lending group, they exist independent of the lending group and the borrower.  An agent also ensures accurate calculation of interest and fees as well as prompt and efficient cash movement.

The role of the security trustee

The security trustee holds an important role within syndicated loans structure by holding the security for and on behalf of all lenders and in accordance with the relevant loan documentation.  The benefits of this are twofold:

• It gives the lenders comfort that their interest in the loan will not somehow be compromised unless otherwise agreed by the lenders as a whole; and
• It makes it easier for an existing lender to sell down all or some of its participation (i.e. the exiting lender does not need to worry about releasing any security and the incoming lender does not need to worry about taking such security – they can concentrate on the commercials of the trade at hand).

As parties to the facility agreement and loan documents, the agency and security trustee respective roles and responsibilities are clearly set out in these documents. Broadly speaking, facility agent role are administrative and mechanical in nature, security trustee in principle owe fiduciary duties to the beneficiaries of the trust namely, the lenders and both act on the instructions of the lenders. This allows the lenders to retain control of the function of monitoring their loans but also gives comfort to the respective agent and security trustee in terms of working within the mandate set by of the lenders.

A proactive agency and trustee team is invaluable as it will add value by offering a personalised service and supply a wealth of market experience and knowledge, allowing their lender clients to make quick decisions and remain agile in their industry.

Typical facility agent and security trustee duties include but are not limited to:

• Loan closing, including providing input on loan administrative and operational matters so any perceived issues are picked up at an early stage before the loan documents are executed
• Collection of all borrower reporting (compliance, financial, regulatory)
• Interest and fee collections and calculations
• Management of bank accounts and application of waterfall payments from controlled accounts
• Coordination of valuation reporting
• Assisting with the execution of any amendments, waivers or consents during the life of the loan
• On development loans, facilitating the entire draw process
• Holding the security package on behalf of the Secured Parties and enforcement of such security, if required.

If you require the services of a proactive, accurate, robust and professional Facility Agent and Security Trustee feel free to get in touch to see how we can partner with your business.

For more information, please contact us at info@trimont.com.