3 Syndicated Lending

Subject(s):

Syndicated loans — Credit risk — Lending and credit

This chapter examines legal issues arising in respect of syndicated lending. It first explains the obligations of lenders to each other, especially as to pari passu sharing of recoveries and voting under the loan facility. Whether syndicated lending may be treated as a collective investment scheme is also considered. The arranger’s mandate to assemble the syndicate and bring the transaction to signing is then discussed. The bulk of the chapter then focuses on areas of legal risk for the arranger. Possible claims in contract, tort and breach of fiduciary duty are examined in detail in the light of relevant case law. The chapter then considers in detail the nature and effect of mechanisms that are used to protect arrangers from such risks. In its final part, the chapter analyses the appointment, role, duties, and powers of the facility agent, along with sources of legal risk for that agent, the protections that are usually employed and how they have fared in the courts.