Contributed By Winston & Strawn London LLP
Both the agency and trust concepts were created by and are recognised under English law.
Loan Market Association standard documents are generally adopted by lenders. Under these, the agent bank is specifically authorised to act for the syndicate members in respect of the administration and servicing of the loan under a contract of agency constituted under the syndicate management clauses of the loan agreement. The agent bank is regarded as an agent of the syndicate members with fiduciary duty for the duration of the loan contract (subject to exclusion clauses).
Historically, most facility agents and security trustees in English syndicated acquisition finance structures were departments within banks, but there are now a significant number of other providers in the market who offer agency and trustee services.
The establishment of a security trust by a security trustee is generally used to hold any English law security on trust for the benefit of the lenders from time to time. Through the establishment of a trust account, the proceeds of payment can be delivered to and from the borrower and the syndicate members on receipt from the syndicate members and the borrower respectively. The security trustee bank is regarded as security trustee of the syndicate members with fiduciary duty for the duration of the loan contract (subject to exclusion clauses).