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As competition among lenders remains fierce and borrowers increasingly look to diversify their funding sources, interest is building in multi-lender structures that offer flexibility as debt arrangements evolve.
The syndicated facility agreement remains the dominant structure in New Zealand, and is generally preferred by the banks as it ensures the lenders are all treated equally and can come together as a group more easily. Strong borrowers can resist this though.
For Chief Financial Officers, the choice is a foundational one - it shapes the cost, administration, and adaptability of your debt facilities over their full lifecycle.
We offer a practical comparison of the two structures across the factors that matter most.
|
Factor |
Common terms deed |
Syndicated facility agreement |
Practical takeaway |
|
Overall structure |
A common terms deed sets out terms common to all facilities, with individual facility agreements documented separately underneath it. |
A single integrated facility agreement governs all lenders and facilities within one document. Pricing is frequently included in separate letters. |
A common terms deed is modular; a syndicated facility agreement is consolidated. Choose based on how many distinct facilities you anticipate. |
|
Flexibility to add or replace lenders/facilities |
Highly flexible. New facilities or lenders can be added by executing a new facility agreement under the existing common terms deed, without disturbing existing arrangements. |
Less flexible. Adding a new facility or lender type typically requires amending or restating the entire agreement. |
If you expect to layer in new tranches, add bilateral facilities, or bring in new lenders over time, a common terms deed provides a more efficient pathway. |
|
Agent |
A common terms deed will typically not have an agent so the borrower will deal with each bank directly. In some cases, a ‘common terms agent’ will have a limited role e.g. maintaining a register of facilities, co-ordinating lenders in relation to amendments to the common terms deed. |
An agent will be appointed to manage payments and bank discussions, giving the borrower a central point of contact for administration. |
A syndicated facility can be more efficient as interest and other payments are made to one agent rather than to multiple banks. Similarly, on a refinance or a waiver, the agent will co-ordinate the banks rather than the borrower needing to engage with each bank separately. This is less important in New Zealand than in other jurisdictions as lender groups tend to be smaller here and borrowers will have strong relationships with most of their banks. |
|
Amendment and waiver mechanics |
Amendments to common terms require consent from all (or a majority of) lenders across facilities, but individual facility terms can be amended on just the relevant lender's consent. |
Amendments typically require majority lender consent across the entire syndicate, with certain "all lender" matters requiring unanimous approval. |
A common terms deed can simplify amendments to individual facilities, reducing the need to coordinate across your entire lender group for facility-specific changes. |
|
Suitability for refinancing |
Well suited to partial refinancings. Individual facilities can be refinanced or replaced without restructuring the entire arrangement. |
Refinancing generally requires a full amendment and restatement or replacement of the agreement. |
If you anticipate refinancing particular tranches independently or on different timelines, a common terms deed offers a meaningful structural advantage. |
|
Cost |
Higher initial documentation and legal costs due to the multi-document structure. Ongoing costs may be lower where changes are confined to individual facilities. Larger refinancings can be more expensive, as each lender/facility is dealt with on an individual basis. |
Lower initial costs given the single-document approach. Ongoing amendment costs can escalate as the agreement grows in complexity. |
Expect higher initial legal costs with a common terms deed, but potentially lower costs on a lifecycle basis if your debt structure evolves frequently. For a straightforward, stable syndicate, a syndicated facility agreement is often more cost-effective. |
Choosing the right structure
The right structure depends on the complexity and expected evolution of your debt arrangements. For a straightforward corporate syndicate with a stable lender group, a syndicated facility agreement is typically the more efficient and cost-effective option.
However, where your financing involves multiple facility types, staggered maturities, or the likelihood of future additions and partial refinancings, a common terms deed offers modularity and long-term efficiency that can deliver meaningful benefits over the life of the financing.
That said, a common terms deed is not always the answer. If your financing is likely to combine straightforward bank facilities with capital markets instruments such as bonds, the additional complexity of a common terms deed may not deliver sufficient offsetting benefits to justify the structure.
We have been advising an increasing number of borrowers on these structural choices as the lending market continues to evolve. Early engagement on structure - ideally before term sheets are agreed - is the best way to ensure your documentation supports, rather than constrains, your broader financing strategy.
