Revolving loan meaning

In general, a borrower seeking external funding usually has two main avenues available: securing a loan, or issuing debt securities on the debt capital markets For the purposes of this Checklist, our focus here is on lending products alone. For further detail on loan categories and structures, see Practice Note: Overdrafts, term loans and revolving credit facilities. For information on debt securities, consult the Practice Notes: Debt capital market finance versus loan finance and Key features of the debt capital markets. Overdrafts The reason for borrowing is central to selecting the most appropriate loan type and choosing the lender. Where the borrower needs swift, flexible, short term financing to support temporary cash flow management needs (for example, to bridge timing gaps between supplier payments and customer receipts), an overdraft is typically the most suitable option in such circumstances...

This Checklist This Checklist presents, in a tabular format, the matters to address when preparing a loan that references a compounded risk-free rate (RFR) such as the Sterling Overnight Interbank Average Rate (SONIA), calculated in arrears. It explains the purpose of the key provisions, highlights issues to weigh up, and offers drafting pointers and practical guidance for practitioners. For further analysis, see Practice Note: Interest provisions in risk-free rate based loan agreements. The Checklist draws on provisions contained in the Multicurrency Term and Revolving Facilities Agreement incorporating backward-looking compound rates and forward looking term rates (lookback without observation shift) issued by the LMA (the LMA Compounded RFR Facilities Agreement). The LMA’s recommended form documentation, with accompanying user guides and commentary, is accessible to LMA members on its website. While the Checklist is prepared on the basis of LMA-style documentation, the guidance will also be relevant to bilateral transactions and agreements using other loan forms. Practice Note: Interest provisions in risk-free rate based loan agreements provides a fuller discussion and...

This Checklist This Checklist outlines key considerations for lawyers (external or in-house) acting for the lender(s) when responding to a borrower led amendment request. It concentrates on permanent amendments rather than one off waiver or consent requests. For guidance on those, see Practice Note: Waivers and consents. In a syndicated transaction, the borrower will ordinarily deliver a written amendment request to the facility agent, which typically includes: the rationale for seeking the amendment, the specific clauses impacted, the applicable consent thresholds, and any snooze and lose provisions. The Loan Market Association (LMA) has published a helpful guide to the amendment process on a syndicated transaction. On a bilateral deal, a borrower’s amendment request to the lender may take a less formal form. This Checklist also references provisions in the Loan Market Association investment grade multicurrency term and revolving facilities agreement incorporating backward-looking compounded rates and forward-looking term rates (the LMA Investment Grade Facility Agreement) and Precedent: Facility...

This Practice Note outlines green loans and the principal considerations when preparing a green loan agreement. It centres on the Green Loan Principles (GLP) issued by the Loan Market Association (LMA), the Asia Pacific Loan Market Association (APLMA) and the Loan Syndications and Trading Association (LSTA)... Clarifies the meaning of a green loan Introduces the GLP and the accompanying GLP guidance Sets out the four core components of a green loan under the GLP and summarises the related guidance Condenses GLP and GLP guidance on what qualifies as a green loan, on reviews, and on greenwashing risks Provides sources for precedent wording, including the Loan Market Association draft provisions, plus drafting pointers What is meant by a green loan? Under the GLP, green loans encompass any form of loan instrument and/or contingent facility (for example, bonding lines, guarantee lines or letters of credit) where the proceeds, or an equivalent amount, are applied solely to fund, re-finance or guarantee, in...

This Practice Note This Practice Note explores warehouse financing as a strand of structured trade finance, enabling a producer or trader to raise funds against its own goods stored in a warehouse. In a standard arrangement, a lender advances a loan to a producer as borrower, and the borrower’s obligations are secured over the stored goods. If put together correctly, the structure is self-liquidating: the loan is cleared from the sale proceeds of the charged goods in the borrower’s ordinary course of trade. Alternatively, a lender provides funds to a trader, as borrower, who uses the money to buy goods from suppliers or producers and then stores those goods in a warehouse. This set-up may suit a trader that has settled with its supplier but cannot afford to store the goods received until it has accumulated enough for an international shipment. The lender would typically lend on a revolving basis, with the borrower’s obligations secured against the goods held in the warehouse. The goods are sold and the...

Loan Market Association investment grade facilities agreement This commentary draws on the Loan Market Association (LMA)’s recommended LMA Multicurrency Term and Revolving Facilities Agreement that incorporates Term SOFR (the LMA facilities agreement). The LMA provides various precedent loan agreements for investment‑grade deals, and single‑currency forms may suit a particular transaction better—the commentary can nonetheless be applied in that context. The provisions in the LMA facilities agreement, and in the LMA’s other precedent forms, are drafted on the basis of a series of assumptions. It is essential to recognise these, as amendments will usually be required where any assumption does not hold true. For further detail on those assumptions, see Practice Note: Loan Market Association investment grade documentation. That Practice Note also outlines the range of LMA‑recommended investment‑grade facility agreements and indicates the circumstances in which each is appropriate. In addition, the LMA publishes recommended form facility agreements for specialist transactions, including leveraged, real estate, trade and developing markets transactions. For more on these, please refer to our...

[ To be printed on the headed paper of the lender’s lawyers ] To: [ insert name and address of Lender ] [ insert date ] Dear [ insert name of Lender ] [ Matter name/reference ] We have served as English law counsel to [ insert name of lender ] (the Lender) in relation to the provision of finance to [ insert name of borrower, company number and registered office ] (the Borrower) comprising a [ term loan and revolving credit facility ] [ describe facilities ] of £[ insert amount ] (the Transaction), and to the negotiation, drafting, execution and completion of the documents specified in Schedule 1 (Documents examined), Paragraph 1 (Opinion Document) (the Opinion Document). We deliver this opinion letter to you, the Lender, pursuant to [ Schedule 2 ] (Conditions Precedent) of the facility agreement between the Lender and the Borrower dated [ insert date ] (the Facility Agreement). Capitalised terms used in this opinion letter but not defined in...

[ To be printed on the headed paper of the lender’s lawyers ] To: [ insert name and address of Lender ] [ insert date ] Dear [ insert name of Lender ] [ Matter name/reference ] We have acted as English law legal adviser to [ insert name of lender ] (the Lender) in relation to financing made available to [ insert name of borrower, company number and registered office ] (the Borrower), comprising a secured [ and guaranteed ] [ term loan and revolving credit facility ] [ describe facilities ] of £ [ insert amount ] (the Transaction). Our engagement has included the negotiation, drafting, execution and finalisation of the documents identified in Schedule 1 (Documents examined), Paragraph 1 (Opinion Documents) (the Opinion Documents). This opinion letter is delivered to you, the Lender, pursuant to [ Schedule 2 ] (Conditions precedent) of the facility agreement between the Lender and the Borrower, [ and Obligors ], dated [ insert...