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HMRC internal manual

International Exchange of Information Manual

Financial Accounts: Custodial Account: Syndicated Loans

Financial Accounts: Custodial Account: Syndicated Loans

Where a borrower requires a large or sophisticated facility, or multiple types of facility, this is commonly provided by a group of lenders, known as a syndicate, under a syndicated loan agreement.

To facilitate the process of administering the loan on a daily basis, one member of the syndicate is typically appointed as Agent.  The Agent’s role is to act as the agent for the lenders and to coordinate and administer all aspects of the loan once the loan agreement has been executed, including acting as a point of contact between the borrower and the lenders in the syndicate and monitoring the compliance of the borrower with the terms of the facility.

The Agent performs exclusively operational functions.  For example, the borrower makes all payments of interest and repayments of principal and any other payments required under the loan agreement to the Agent and the Agent then distributes these monies to the syndicate members as required by the syndicate agreement.  Similarly, the lenders advance funds to the borrower through the Agent.  The terms of a syndicated loan agreement usually entitle the Agent to undertake the roles described above in return for a fee.

In these circumstances the participation of a lender in a syndicated loan, where a UK Financial Institution is the agent acting for and on behalf of the syndicate, does not lead to the creation of a Custodial Account [see IEIM401580] held by the agent.