Page 18 - MTIA Summer 2022 Market Brief

The Dynamics for Loan Agents Succeeding with Successors

As intermediaries between lenders and borrowers, Agent independence can also be advantageous when
independent loan agents play a critical part in distressed lenders decide to replace agents with ties to the borrower
credit situations. Agents strike the right balance between or sponsor. Similarly, initial agents may choose to relinquish
holding firm to existing loan documentation within the their role in a distressed loan if there are conflicts of interest
context of borrowers’ and lenders’ needs and interests. across the various tranches in the capital structure.
From Wilmington Trust’s vantage point as an Independent
Loan Agent, we believe vigilance, communication, and The move to a successor must happen quickly—the faster,
experience are critical. the better. In the case of complex transactions, this
transition entails bringing on hundreds of existing lender
In addition, sometimes certain waivers or amendments may positions and processing a backlog of hundreds of trades.
be necessary to achieve the most efficient and sensible During the transition, loan trades and payments become
outcome for the deal parties. However, if a majority of frozen at the very time when original lenders are more likely
lenders direct the agent to take actions that other lenders to trade out and when distressed investors are more likely
may dispute, agent experience is essential. Finding ways to be looking for ways to get into the syndicate.
to navigate such scenarios requires significant savvy and
flexibility backed by a rigorous understanding of the credit Loan Agents, given their intimate operational familiarity
agreement. It also requires clarity around what is and is not with loan documents and their implications, can be a highly
in the agent’s purview and when to pull in other resources valuable source of information in this process, helping
needed before, during, and after the transaction. creditors and their counsel achieve the best outcomes in
the situation.

Acting in the Lenders’ True Best Interest

In distressed situations, lenders
become increasingly concerned Commitment Perspective
and may attempt to pursue Act in the best interests Maintain an unbiased
aggressive remedies outside the of the lenders view of what loan terms
terms of the loan documentation. make possible
Loan Agent objectivity is essential Take direction from Remain objective while
required lenders
to balancing the true best limiting additional
interests of the borrower and turbulance at times
lender. of stress

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