Committed loan facility meaning

What is a facility agreement? Many construction projects, especially larger developments, often need external finance from banks or other lenders to support them during the build phase. The borrower will usually enter a facility agreement with the lender (or a group of lenders), which sets out the terms and conditions of the deal. It records the financing arrangements reached between the parties. It covers obligations, core pricing and timing requirements mutually agreed between them. Typical structure The precise make-up of a facility agreement varies according to factors such as the form of facility provided and the proposed application of the funds. Nonetheless, its core purpose is to see the lender’s capital repaid on time and to secure the return the lender expects on the loan at the agreed point. Consequently, most facility agreements contain broadly comparable provisions, commonly set out in a similar framework. This Practice Note outlines the standard elements of a bilateral, committed facility agreement made with a corporate borrower for a construction or development...

This glossary sets out many of the expressions commonly used in the leveraged finance market. Words appearing in the definitions in bold are defined elsewhere in this glossary. For further banking terminology, please refer to the main Banking & Finance Glossary... Acquisition finance glossary—A Acceleration Acceleration is the formal action taken by the agent, on the instructions of the majority lenders, following an event of default, such as making a demand for early repayment of the loan. See Practice Note: Accelerating a loan for more information... Accordion feature/accordion facility An accordion, also called an incremental debt feature, is a mechanism in the facilities agreement that, provided specified conditions are satisfied (for example, pro forma compliance with a leverage test), permits those lenders under the facilities agreement who wish to do so to advance additional debt. The terms for that extra debt are typically captured in an increase notice. This accordion or incremental debt flexibility is different from structural adjustment, which usually requires the majority consent...

What is a borrowing base facility? Borrowing base facilities (‘BB Facilities’) are a form of trade finance. They are working capital arrangements that provide short-term liquidity either through advances or by issuing trade instruments, such as letters of credit (see: Letters of credit—overview) or on demand guarantees (see: On demand guarantees/bonds—overview). These facilities are fully secured against current assets—commonly trading receivables, inventory (i.e. goods in storage or in transit), cash and contractual rights—of the borrower and/or other security providers. Consequently, the borrower’s available capital at any given time is directly linked to the value of the assets securing the lender(s). BB Facilities are typically offered to trading companies on a revolving basis to fund the purchase, storage, transport and sale of prescribed commodities. They are often used to finance a pool of traded assets subject to high price volatility. Reflecting this, a standard borrowing base facility agreement will include provisions focused on those assets and their valuation. A typical BB Facility has a tenor of 1–2 years, although...