As we head into the final stretch of 2022, issuers and borrowers are facing an environment of rising interest rates, growing inflation, worker shortages, and supply chain disruption. Companies kept afloat by government stimulus, low interest rates, and covenant light loans now face tighter monetary policy and credit conditions. When entering a potentially complex restructuring or bankruptcy, issuers and borrowers need stability and expert service. Like insurance, indenture trustees and loan agents are often overlooked until they are really needed.
With so many moving parts in a bankruptcy or restructuring, it is vital to have an experienced partner that is uniquely situated to provide world-class service at a moment’s notice. The last thing a struggling company needs is more turmoil and red tape from service providers. Issuers and borrowers can stay ahead of the curve by proactively assessing their indenture trustees and loan agents before they enter a restructuring.
There is a perception that it’s very difficult for a new indenture trustee or loan agent to step in if a change is needed. That’s simply not true. Here are three misconceptions about indenture trustee and loan agent roles:
- Misconception #1: Transitioning to a new indenture trustee or loan agent takes several months
An experienced corporate trust and agency provider will have well-established processes and transition plans for successor roles. This can be done on a very short timetable and often does not require transaction documents to be amended.
- Misconception #2: Full-service indenture trustees and loan agents need to be part of a large bank
Large banking institutions offer corporate trust and agency services, but with it comes the weight of bureaucracy, potential conflicts, and the consequential slow turnaround times. A full-service corporate trust and agency provider can operate independent of any banking organization, affording flexibility, speedier on-boarding and KYC, and timely customer service.
- Misconception #3: Any indenture trustee and loan agent can provide customized solutions
Corporate trust and agency services are more than just a list of high-level deliverables. Customized solutions require a dedication to service that goes above the industry standard. A Corporate Trust and Agency partner with a team that knows its clients and the industry can quickly develop a bespoke solution that meets the unique requirements of a transaction.
Companies facing a potential restructuring or bankruptcy should evaluate their service providers before entering a long and complex process. If there is a possibility that an indenture trustee or loan agent will resign due to conflict or can’t provide the necessary flexibility and expertise, issuers and borrowers should evaluate service providers with an emphasis on service, expertise, operational efficiency, and independence. Our resource guide can help you through the process.
We’re Here to Help
Delaware Trust, a wholly owned subsidiary of CSC, is a leading provider of Corporate Trust and Agency services. Our world class service–Net Promoter Scores–are proof that we deliver flawless results on time. We assign each deal a single point of contact; and our innovative technology solutions streamline our KYC processing for faster onboarding. Finally, Delaware Trust is an independent trust company, not affiliated with any lending institution, minimizing the likelihood of conflict of interest.
We support restructuring professionals across a broad suite of services, including Independent Director, loan collateral agent, indenture trustee, Section 363 escrow agent, liquidating/litigation trustee and more. To learn more, visit us at delawaretrust.com.