Contributed By Winston & Strawn London LLP
The transfer of loans to new parties is governed by the terms of the facility agreement. Trading of syndicated debt is common and active, with the most prevalent structures for trading debt being the following:
A transfer will, at a minimum, require the borrower or obligor's agent to be consulted or notified, or trigger pre-emption or other rights for the other lenders in the syndicate. Assignment and transfer regimes have become more controversial as lenders in the European market try to reduce secondary market transfer settlement terms. Provisions which require a borrower’s consent, or allow transfers to lenders on a white list or during payment or insolvency-related events of default are resisted. Transferability in relation to competitor restrictions and around loan to own and distressed investors has become a focus as well. All of these entitlements need to be addressed and observed in order to ensure a valid transfer.
The buyer of the debt will usually benefit from any English security following the transfer without compromising the priority of the security, as English law security held under secured syndicated loans will typically be held on trust by a security trustee for the benefit of the lenders from time to time and/or benefit transferors. Different considerations may apply to overseas security for a loan governed by English law.