European loan agency: finding the right balance of agility and stability

Learn what to look for in a loan agency partner to help you streamline transactions and avoid unnecessary obstacles.

The European loan market is in a period of transition right now. Some sectors are heating up and others are stagnating due to a variety of ever-changing geopolitical and macroeconomic factors.

Overall issuances in Europe are down since last year “as high inflation, rising interest rates and cooling M&A activity put the brakes on leveraged loan and high yield bond issuance,” states a recent White & Case article.

However, “average deal sizes across syndicated loans and high-yield bonds in Europe are at a record high,” according to S&P Global Market Intelligence. And in another report, Bloomberg says that “loans with ESG terms are growing to a record slice of the pie” in Europe.

As the market continues to shift and evolve, some needs remain constant. No matter the climate, successfully closing a deal will always depend upon the ability of all parties to move quickly, act responsively and ensure you have what you need when you need it.

What is loan agency?

Loan agency, at its most fundamental level, is when a party serves as facility agent and acts as an intermediary between a borrower and their lenders. Primary functions include the processing of payment activity on the loan and acting as a central liaison for amendment and waiver activity.

Loan agency providers broadly fall into two categories: bank agents (serving as operational support for their lending divisions) and non-bank, third-party agents. Bank agents, while stable, often lack the urgency and flexibility of their smaller counterparts. And independent agents, while agile, often lack the financial strength and capabilities of larger institutions.

“At U.S. Bank, we try to find the perfect balance right in the middle of those two groups,” says Joshua Theodore, vice president of business development at U.S. Bank Global Corporate Trust. “We have the backing of a large, financially secure organization, but also a nimble responsiveness and client-focused mindset throughout the deal execution and ongoing loan servicing.”

Sometimes, it can make sense for credit funds – or even large banks with internal loan agency teams – to outsource loan agency work to better-suited firms.

“It’s common for loan agency work to be a non-core activity within larger lending institutions. The lending itself and borrower due diligence are where they want to focus, and the agency roles just happen to be a necessary operational role. Their appetite to do this type of work isn’t always high, and if it’s something they can easily outsource, they’re often happy to do so.”

The benefits of agility: speed and efficiency

The information loan agents facilitate between a borrower and lenders can be vital for investment decision-making. Communication is crucial, and clients expect agents to be responsive and proactive throughout the entire course of servicing their transactions.

Loan agency roles – like that of a facility and security agent – are often small components within a much larger transaction. Being agile and commercial are key to not delaying the timeline or disrupting the process.

“You want your loan agent to be quick. You want them to be competent and experienced,” says Joshua. “But most importantly, you want them to enhance the execution process. Two examples of this include onboarding KYC information requests and being commercial on document comments. You need your agent to be unobtrusive in this process.”

Over the course of structuring a deal, different parties will often request changes or last-minute operational updates – making quick responsiveness essential for a smooth closing process. At U.S. Bank, we follow Loan Market Association (LMA) market-standard document practices, so the act of reviewing transaction documents with other counsel parties is smooth and efficient.

KYC onboarding

Certain transactions can be very time sensitive, particularly if part of an M&A process. Agility becomes incredibly valuable.

“Traditional bank agents serving in an operational role for their lending divisions may not have the timely focus on KYC completion and account set-up,” says Joshua. “This can really complicate certain workstreams and make deal parties anxious as they near transaction close.”

Parties often focus much of their attention on the closing documents and commercial elements of a deal. Onboarding components, like KYC, aren’t always given as much priority as they deserve. At U.S. Bank, we have a dedicated KYC onboarding team that will liaise directly with a KYC contact to complete KYC.

“We meet many clients who expect KYC onboarding at a large bank to take a month or more, and they’re surprised to learn we can usually do it in less than a week. We know how imperative it is for clients to have deal KYC cleared, and our KYC team are very proactive the moment we are mandated.”

The benefits of stability: infrastructure and breadth of services

Agility is valuable when it comes to loan agency, but strength and stability are important considerations as well. Large established providers have the capital to make significant infrastructure commitments – including human resources, systems resources and technology. Banks also have a robust framework of governance, regulatory and risk-management processes to ensure compliance and minimize potential liabilities.

At U.S. Bank, we provide professional and independent facility and security agent services for credit facilities. Our team is fully domiciled in London, and we operate a single-point-of-contact model for relationship management to cover execution and ongoing services.

We have a global team in place to cover administration, both in the U.S. and Europe as required. Our London team is fully supported by ancillary roles such as KYC onboarding, internal legal, operational teams and compliance functions. As an active member of the LMA and a leading CLO and credit fund loan administrator, we have experience with a diverse range of loan and bond financing structures such as syndicated transactions, club deals, successor agency, unitranche, direct lending and bridge financing.

“Our loan agency business is established and mature, and we’ve been providing facility and security agent services for 10 years in Europe,” says Joshua. “We’re a big bank doing this work, and it sits perfectly alongside our bond trustee and agency services. We’ve got an appetite for it, and we have the stability and infrastructure that gives all parties involved absolute confidence in our capabilities.”

Comprehensive solutions

We specialize in a variety of facility types, and our team provides a diverse range of experience on credit structures.

Core service offerings:

• Facility agent and account bank services
• Security agent across multiple jurisdictions
• Loan closing and settlement at the point of origination, acquisition or transfer
• End-to-end loan administration, including calculation and distribution of payments, position keeping, assignment and transfer processing
• Compliance with governing documents and underlying loan covenants
• Prefunding escrow services for closing efficiency

“With the resources of a large financial institution, experienced professionals and flexible solutions, we’re here to support your evolving needs,” says Joshua.

U.S. Bank has a sound financial history and extensive expertise in servicing loans. To learn more about our loan agency services, visit our website or contact us.