Legalseas
Syndicated financing
post-Torre – what lenders
and agents need to know
The recent English High Court decision in Torre Asset
Funding v The Royal Bank of Scotland plc puts into the
spotlight the role and duties of a facility agent in a
syndicated loan.
The case concerned a loan agreement
based on the LMA standard form. Since
many shipping loans today incorporate
LMA standard terms, this decision will
be of particular interest to shipping
banks. The LMA form sets out the duties
of the facility agent and clearly states
that they are “solely mechanical and
administrative in nature”.
The court in Torre was asked to impose
additional common law obligations
on the facility agent – specifically,
an obligation to pass on information
concerning the borrower. The court
declined to do this. It effectively said
that that it was not appropriate to
impose additional duties on the facility
agent where the loan agreement itself
already clearly defined the facility
agent’s role. At the same time, the court
upheld the standard LMA exclusion of
liability clause, saying that it extends to
omissions and, therefore, would have
been effective to protect the facility
agent in this case.
Although the court refused to impose an
obligation to pass on information, the
judge (of his own volition) did question
whether an obligation might arise (i)
10 Norton Rose Fulbright – April 2014
from the facility agent’s express power
to pass on information concerning the
borrower, and (ii) on the basis that the
facility agent had a duty to exercise that
power in the best interests of the lenders.
The end result was that the court found
that there was no obligation, but there
was a warning, that a facility agent
cannot just assume that its role is purely
administrative and that it does not need
to apply any qualitative analysis to
information it receives.
Agent banks under LMA style
documents will welcome this decision.
They can continue to regard their role
as “mechanical and administrative”
and limited by the particular wording
of the loan agreement. However,
this case may encourage lenders to
negotiate harder on agency provisions,
so as to impose greater express
obligations on the facility agent to pass
on information.
For more information contact:
Simon Lew,
Partner, London
Norton Rose Fulbright LLP
Tel +44 20 7444 2799
[email protected]
Edward Emerson
Associate, London
Norton Rose Fulbright LLP
Tel +44 20 7444 5367
[email protected]