Glossary
The Sterling Overnight Index Average — the near risk-free benchmark interest rate that replaced LIBOR for sterling lending, based on actual overnight transactions in the sterling money market.
Loan Structures and Facility Agreements
from Banking & Finance
The core document in any lending transaction is the facility agreement — the contract between the borrower and its lenders. Most large facilities in the UK and European markets are documented on LMA (Loan Market Association) standard forms, which provide a widely recognised baseline that lawyers then negotiate and tailor. A facility agreement typically includes term loans (a lump sum drawn down at the outset and repaid by maturity), revolving credit facilities (an RCF — a flexible pot the borrower can draw down and repay repeatedly, like an overdraft on a larger scale), and sometimes capex facilities or acquisition facilities for specific purposes. Key negotiation points include the margin (the interest rate above the benchmark — typically SONIA in sterling or SOFR in dollars), the commitment fee on undrawn amounts, the maturity date, and the circumstances in which lenders can demand early repayment.
Recent Trends
from Banking & Finance
Private credit — lending by non-bank institutions such as direct lending funds — has exploded in the past five years, now rivalling the syndicated loan market for mid-cap leveraged buyouts. Direct lenders like Ares, HPS, and Owl Rock offer speed and certainty of execution, though typically at a higher margin than bank debt. The benchmark rate transition from LIBOR to risk-free rates (SONIA in the UK, SOFR in the US) is now largely complete, but legacy contracts and fallback mechanics still generate work. ESG-linked loans — where the margin adjusts if the borrower hits sustainability targets — have become common, though scrutiny of the rigour of those targets is intensifying. On the restructuring side, the UK's Restructuring Plan (introduced by the Corporate Insolvency and Governance Act 2020) has given distressed borrowers a powerful new tool, allowing courts to impose a restructuring on dissenting creditor classes — a mechanism already tested in major cases like Virgin Active and Adler Group.
Facility Agreement
The core lending contract between borrower and lenders, setting out the terms of the loan including amount, interest rate, repayment schedule, covenants, and events of default.
Syndicated Loan
A loan provided by a group of lenders (the syndicate), coordinated by an arranging bank, spreading the credit risk of a large facility across multiple institutions.
LMA (Loan Market Association)
The trade body that publishes standard-form loan documentation used as the starting point for most European syndicated loan and leveraged finance transactions.
Leveraged Buyout (LBO)
An acquisition funded predominantly with borrowed money, typically by a private equity sponsor, where the debt is secured against the acquired company's assets and cash flows.
Intercreditor Agreement (ICA)
A contract between different classes of lender governing priority of repayment, rights to enforce security, and conduct during a restructuring — critical in leveraged deals with multiple debt tranches.
Financial Covenant
A clause requiring the borrower to maintain specified financial ratios (e.g., leverage, interest cover) tested at regular intervals, breach of which constitutes an event of default.
Security Package
The bundle of charges, pledges, and assignments granted by the borrower and its group companies over their assets in favour of lenders, providing collateral for the loan.