How does a successor loan agent solve the tech gap?

Whether the loan is between a broad syndicate of bank lenders or a club deal between credit funds, there are a number of situations that necessitate appointment of a successor agent.

Triggers include: (i) need for enhanced reporting capabilities, (ii) difficulties in undertaking complex calculations and payments, (iii) lender conflict, or (iv) payment default etc.

Pros and Cons

Successor agent appointments of course involve additional activity; however, it is an opportunity for lenders to obtain tailored services and reporting to better meet evolving investor needs.

Also, in circumstances where lenders are themselves funds, the combination of fund and loan administration with one service provider creates additional cost savings.

Onboarding process

Stakeholders typically disclose: (i) credit agreement, (ii) amendments, (iii) any accrued unpaid interest, (iii) amortization schedule, (iv) details of assignments, paydowns etc.

A tech decision

Successor agent appointment typically involve a deep tech dive into lender data requirements (with the benefit of hindsight) in order to identify which successor agent technologies should be deployed.

Regardless of whether loans were originated by a bank syndicate or private credit lenders, discussion typically focuses on successor agent’s proprietary tech platforms’ ability to:

1. Efficiently handle deal mechanics and stakeholder communications;
2. ?Connect and share data with lender reporting technologies;
3. Undertake complex loan calculations (overnight rates, IRR, PIK, make-whole);
4. Administrate roll overs, consents, waivers and amendments; and
5. Efficiently monitor:?complex loan portfolios; borrower financials;?detailed loan covenants; and diverse collateral packages.

?Solving the ‘tech gap’

Perhaps the most interesting feature of the successor agent’s role is the extent to which DCM deals have evolved from requiring ‘simple’ payments to complex fund + fund finance reporting solutions.

As clever credit managers innovate new hybrid lending products, the successor agent will face new innovation opportunities as high-tech solutions further proliferate in the private credit space.