Why appoint a third-party facility agent on your loan?

When it comes to loan agency, using a trusted service provider can offer peace of mind and security. Read our latest thought leadership on the benefit of all parties involved.

Barings and HPS among others have recently added to their specialist workout teams.  This gives a pretty clear indication that the big players in the private debt market anticipate an increase in defaults over the short to medium term. This market sentiment reiterated to me the importance of appointing a third-party agent when structuring your loans.  This article sets out a few of the key advantages.

Independence

Unlike a lender agent, a third-party agent is independent and therefore conflict free.  When a loan goes into default it is even more important that the agent acts appropriately and does not favour any contractual party above another.  Where an agent is also a lender this could have a negative impact on the agent’s performance or even just its perception with the other parties.  It is not uncommon for an agent to be replaced should a loan go into default, however, if there is an uptick in the number of defaults this might make appointing a successor independent agent more difficult at that stage.  It can also be considerably more expensive to appoint a successor than it would have been to appoint an independent agent from the start. Therefore, perhaps it is prudent to start on the basis that the agent should be independent.

Expertise

A good third-party loan agent will be able to add value through experience and understanding of requirements. This expertise can allow an agent to take the required steps without legal advice (when not required) and save on deal costs.

Technology

Another way that using an agent can reduce costs is through leveraging their technology.  At Altum we use our own propriety technology alongside a leading loan tracking system.  We have invested time, expertise and money to implement and maintain this high quality technology solution and this allows our clients to benefit from this investment without having to do the same themselves. The use of a dedicated system to track loans, calculate interest and produce notices means we do not suffer from human or transposition error and the parties on our loans can rely on the information we provide.  Keeping track of interest and principal repayments can be a daunting task so having a payment reminder on the dashboard helps us stay informed of upcoming critical payments and prompts us to send a reminder to the borrower for any missed or delayed payment. We are also able to quickly and accurately pull various reports on our clients portfolio.

Continuity

In most scenarios the independent agent can and will also act as security trustee.  Therefore, if a lender transfers its interest to another lender, the security does not need to be transferred as it would continue to be held by the security trustee.

How can we help you

Altum’s agency team has genuine private debt experience and expertise.  They are supported by a leading technology solution in order to provide the highest standard of independent agency services.  Please get in touch if you would like to discuss or if you would like more information.