4.7 Particular Remarks on Syndicated Loans 129Table 4.2 Agent’s Duties
“The Agent, the Managers and the Banks.Each Manager and each Bank (other than the Agent) hereby irrevocably appoints the
Agent to act as its agent under, and in connection with, this Agreement and irrevocably
authorises the Agent to exercise such rights, powers and discretions as are specifically
delegated to the Agent by the terms of this Agreement, together with all such rights,
powers and discretions as are reasonably incidental thereto. The Agent has only those
duties which are expressly specified in this Agreement and those duties are solely of a
mechanical and administrative nature. The Borrower shall, unless it is aware or should be
aware of any irregularity, be entitled to assume that the Agent represents the Banks or
the Instructing Group, as the case may be, and that all the necessary permission and con-
sents have been obtained.”
“The Agent may assume that any representation made by the Borrower in connection
with this Agreement is true.”
“The Agent shall: promptly inform each Bank of the contents of any notice or document
received by it from the Borrower under this Agreement; promptly notify each Bank of
the occurrence of any Event of Default or any default by the Borrower in the due per-
formance of, or compliance with, its obligations under this Agreement of which the
Agent has actual knowledge or actual notice; and except where otherwise provided in
this Agreement, act as agent under this Agreement in accordance with any instructions
given to it by the Majority Banks, which instructions shall be binding on all of the Man-
agers and the Banks.”
“Notwithstanding anything to the contrary expressed or implied in this Agreement, nei-
ther the Agent nor any of the Managers shall be bound to enquire as to whether or not
any representation made by the Borrower in connection with this Agreement is true.”Decision-making by the lenders. For obvious reasons, the terms that set out the
procedure of decision-making by the lenders belong to the core terms of the inter-
creditor agreement.
As a rule, simple things which do not affect the core commercial terms of the
syndicated loan agreement can be decided on by a majority or qualified majority
of capital (typically, more than 50%, 66%, or two-thirds of the capital). These
matters may include: the use of remedies in the event of breach of contract; waiv-
ers of breaches of covenant; relaxation of covenants (for example negative
pledge); and whether an event is “material” or not. As said above, many events
such as incorrect representations or misstatements or adverse changes must be
“material” before they trigger something, and the agent typically prefers to miti-
gate its own risk by not undertaking to interpret “materality”.
Important questions typically require consensus. For example, they might in-
clude: waiver of conditions precedent; extension of maturities; reduction of the
amount of payments; reduction of the interest rate; and change of currency.
Sharing. “Sharing” or “pro rata sharing” clauses are characteristic of syndicated
loans. Sharing protects both the participating banks and the borrower.
The conditions several clause and the pro rata sharing clause complement each
other. A bank is not responsible for the fulfilment of other banks’ duties, and a
bank may have a right to collect its claims for its own benefit. However, this prin-