Loan Servicing Notification

Transcription

1 Version: 1.0 Syndicated Loan FpML Working Group Chair: Bhavik Katira LSTA Agent Bank Communications Working Group Chair: Ellen Hefferan

2 Contents 1 Document History Loan Servicing Message Design Loan Servicing Notification Loan Servicing Notification Hierarchy Abstract Facility & Loan Contract Notification Loan Servicing Events Loan Servicing Events Hierarchy Abstract Event Definition Reference Data: Assets and Parties Loan Servicing Facility Events Accruing Fee Change Events Scenario / High-level Business Process Accruing Fee Change Events: Accruing Fee Change Data Fields Accruing Fee Change Events: Accruing Fee Expiry Data Fields Accruing Fee Payment Event Scenario / High-level Business Process Accruing Fee Payment Data Fields Accruing PIK Payment Notification Scenario / High-level Business Process Accruing PIK Payment Data Fields Accrual Option Change Notification Scenario / High-level Business Process Accrual Option Change Data Fields Facility Notification - Commitment Adjustment Scenario / High-level Business Process Commitment Adjustment Data Fields Facility Notification Facility Termination Scenario / High-level Business Process Facility Termination Data Fields Loan Servicing Facility/Contract Notifications Non-Recurring Fee Payment Notification Scenario / High-level Business Process Non-Recurring Fee Payment Data Fields

3 4.2 Facility Rate Change Notification Scenario / High-level Business Process Non-Recurring Fee Payment Data Fields Loan Servicing Loan Contract Notifications Loan Contract Notification - Borrowing Scenario / High-level Business Process Borrowing Data Fields Loan Contract Notification - Base Rate Set Scenario / High-level Business Process Base Rate Set Data Fields Loan Notification - Interest Payment / Interest Capitalization Scenario / High-level Business Process Interest Payment/Capitalization Data Fields Loan Notification - Repayment Scenario / High-level Business Process Repayment Data Fields Loan Notification - Adjustment Scenario / High-level Business Process Adjustment Data Fields Loan Notification Maturity Change Scenario / High-level Business Process Maturity Change Data Fields Prepayment Notification Scenario / High-level Business Process Prepayment Data Fields Loan Notification - Rollover Scenario / High-level Business Process Rollover Notice Data Fields Letter of Credit Notifications L/C Adjustment L/C Adjustment Data Fields L/C FX Revaluation Scenario / High-level Business Process L/C FX Revaluation Data Fields

4 6.3 L/C Issuance Scenario / High-level Business Process L/C Issuance Notice Data Fields L/C Issuance Fee Payment Scenario / High-level Business Process L/C Issuance Fee Data Fields L/C Rate Change Scenario / High-level Business Process L/C Rate Change Data Fields L/C Renewal Scenario / High-level Business Process L/C Renewal Data Fields L/C Termination Scenario / High-level Business Process L/C Termination Data Fields Syndicated Loan Statements Deal Statement Scenario / High-level Business Process Deal Statement Data Fields Facility Position Statement Scenario / High-level Business Process Facility Position Statement Data Fields Facility Outstandings Position Statement Scenario / High-level Business Process Facility Outstandings Position Statement Data Fields Outstanding Contracts Statement Scenario / High-level Business Process Outstanding Contracts Statement Data Fields

5 1 Document History Date Version Author Changes Q Chad Freeburg Document created as part of Loan FpML Working Group sessions. 4

6 2 Loan Servicing Message Design As part of the v5.x design there is now a segregation of notification headers, embedded event types and reference data, it is important to understand this distinction. Every notification follows the same design template. Figure 1: Notification data segregation FpML Header: Contains all the logistical information around the message transmission. o A message uniquely. o Who the message was sent by and to whom. o Whether it s a correction. o Timestamps. Loan Notification Header: All messages between any two counterparts will contain a notification header. This message container has certain design traits that allow all nonevent logic to be communicated. Notification headers allow the sender/receiver to identify: o Business dates. o Whether the event is global/lender specific. o Supporting information (payments and position). Loan Business Events: All notifications contain at least one business event. These business events contain all of the business logic required to process a particular transaction. Reference Data: Asset and party information is stored here and is referenced throughout the rest of the notification. The design combines both event-specific information together supplementary asset/position data. This combination ensures that agents and lenders are constantly synchronized 5

7 (especially through the transition period from fax/paper based communication to electronic). 2.1 Loan Servicing Notification Loan Servicing Notification Hierarchy In order to maintain some consistency and order around the various notification types (and embedded events), they are designed in a hierarchical manner depending on the level at which the notification applies. Specialization occurs once the notification is deemed to be either at the deal, facility, loan contract or L/C level (in the form of the correct reference asset pointers in the header). Please refer to Figure 2 below to understand the hierarchy of all types used to construct loan servicing notifications. 6

8 Correctable Request Message Abstract Servicing Notification Abstract Facility Notification Abstract Contract Notification Syndicated Loan Statement Accruing Fee Change Notification Accruing Fee Payment Notification Accrual Option Change Notification L/C Notification Deal Statement Facility Outstandings Position Statement Accruing PIK Payment Notification Facility Notification Loan Contract Notification Non-Recurring Fee Payment Notification Facility Position Statement Outstanding Contracts Statement Facility Rate Change Notification Prepayment Notification Rollover Notification Contains a single event. Contains a combination of multiple events. Contains a substitution group of events. Figure 2: Hierarchy of all notification types Let s take a look at the baseline features of a notification. For the purposes of this section, we will focus on the servicing messages only (statements will be covered later in the document). 7

9 2.1.2 Abstract Facility & Loan Contract Notification The abstract servicing notification contains all the common elements at the header level. References to either just a facility or both the facility and loan contract will then determine which events can be embedded within the notification (as per Figure 2). Notification Header Generic fields used to aid the efficient flow of messages between any two parties. Message Id Alphanumeric Y A unique identifier for the specific message. Conversation Id Alphanumeric N The unique identifier (name) for the conversation (session), this message is within. A conversation identifier is usually assigned by the initiator of a conversation. Conversations may only be initiated and terminated. Joining conversations has the effect of initiating new conversations. Conversations cannot be split; this instead has the effect of parallel activities on the same conversation or the initiation of a new conversation. Each message belongs to only one conversation. In Reply To Alphanumeric N A copy of the unique message identifier (within its own coding scheme) to which this message is responding. Sent By Alphanumeric Y The unique identifier (within its coding scheme) for the originator of a message instance. Sent To Alphanumeric N A unique identifier (within its coding scheme) indicating an intended recipient of a message. Copy To Alphanumeric N A unique identifier (within the specified coding scheme) giving the details of some party to whom a copy of this message will be sent for reference. Creation Timestamp Date/Time Y The date and time (on the source system) when this message instance was created. Expiry Timestamp Date/Time N The date and time (on the source system) when this message instance will be considered expired. Implementation Specification Complex N The version of FpML against which the message was defined. Is Correction Flag Y Defines whether the message is a correction to a previous message. In this case the embedded event can have a pointer to a previous version of the same event. Correlation Complex N A common FpML structure used to identify version and sequences of messages. On Behalf Of Complex N In the case where a message was created by a third party, this identifies the requesting party. Some implementations may simply simulate the sending party (and not use this reference). 8

10 Loan Notice Details Fields which are common to all loan notification messages. Notice Date Date Y The date on which the notice was generated. Is Global Only Flag Y Defines whether the message contains global information only (versus both global and lender share information). Payment Details Complex N Payment details associated with the message. CAN CONTAIN Facility Position A structure which contains the position being held by the lender on both the facility and loan contract levels. This position information is from the message sender's viewpoint as of the date of the associated notice. Prior Global Commitment Amount Currency N The amount of principal commitment that was allocated to the lender within the facility (this is prior to any associated events). Current Global Commitment Amount Currency Y The amount of principal commitment currently allocated to the lender within the facility (this is after any associated events). Prior Lender Commitment Amount Currency N In the case of a business event which changes the lenders commitment level, this is the amount as of before the associated business event. Current Lender Commitment Amount Currency Y The current lender commitment level as of the time of the message creation. Each commitment amount contains: Utilized global/lender Currency N The utilized global commitment amount. share commitment amount Funded global/lender Currency N The funded portion of the utilized commitment amount. share amount (of utilized amount) Unfunded global/lender share Currency N The unfunded portion of the utilized commitment amount. amount (of utilized amount) IF it s a Loan Contract or L/C Notification THEN Loan Contract Position N [0..n] A structure used to define all positions held by the lender at the loan contract level. This structure is designed to hold either some or all loan contracts. Loan Contract Complex Y (see Loan Contract Summary section above) Summary Prior Global Loan Contract Amount Currency N In the case of a business event which changes the global loan contract level, this is the amount as of before the associated business event. 9

11 Current Global Loan Contract Amount Currency Y The current global loan contract level as of the time of the message creation. Prior Lender Loan Contract Amount Currency N In the case of a business event which changes the lenders loan contract level, this is the amount as of before the associated business event. Current Lender Loan Contract Amount Currency Y The current lenders loan contract level as of the time of the message creation. Letter of Credit Position N [0..n] A structure used to define all positions held by the lender at the letter of credit level. This structure is designed to hold either some or all letter of credits. LC Id Type Alphanumeric Y There can be different id types applicable here. LC Id Alphanumeric Y An agent-bank controlled Id for purposes of uniquely identifying a specific contract. Prior Global LC Amount Currency N In the case of a business event which changes the global letter of credit level, this is the amount as of before the associated business event. Current Global LC Amount Currency Y The current global letter of credit level as of the time of the message creation. Prior Lender LC Amount Currency N In the case of a business event which changes the lenders letter of credit level, this is the amount as of before the associated business event. Current Lender LC Amount Currency Y The current lenders letter of credit level as of the time of the message creation. 10

12 2.2 Loan Servicing Events Loan Servicing Events Hierarchy Events are similarly organized in a hierarchical fashion. Figure 3 below shows the overall set of events designed for loan servicing. Abstract Event Require Id Loan Event Facility Event Facility Contract Event Loan Contract Event L/C Event Accruing Fee Change Notification Accr. Fee Change Accr. Fee Expiry Accruing PIK Payment Notification Accruing PIK Payment Facility Notification Accruing Fee Payment Notification Accruing Fee Payment Accruing Option Change Notification Fixed/Float.Opt. Chg Accr. PIK Opt Chg L/C Opt. Chg Non-Recurring Fee Payment Notification Amendment Breakage Facility Extension Funding Upfront Waiver Misc* Facility Rate Change Notification Default Rate Change Default Rate Expiry Man. Cost Rate Chng Man. Cost Rate Expiry Penalty Rate Change Penalty Rate Expiry Single event. Combination of events. Loan Contract Notification Borrowing Int. Capitalization Interest Payment Loan Contr. Adjust. Loan Contr B.Rate Set Loan Contr Mat.Chg. Repayment Prepayment Notification (Combination of events) Repayment Commitment Adj. Breakage Rollover Notification (Combination of any number of the above events) Base Rate Set Borrowing Commit. Adjust. Int. Capitalization Interest Payment Repayment L/C Notification L/C Adjustment L/C FX Revaluation L/C Issuance L/C Iss. Fee Pay. L/C Rate Change L/C Renewal L/C Termination Commitment Adjust. Facility Termination Substitution group of events. Figure 3: Hierarchy of all event types Events are categorized into: Facility level: require references to facility information only, since the event does not directly affect contract information. Facility-Contract level: requires facility references but can also affect contracts (contract references are optional in this case). Loan Contract level: requires facility and contract references since the event affects contracts directly. L/C level: requires facility and L/C references since the event affects letter of credits directly. 11

13 2.2.2 Abstract Event Definition The following is a description of the abstract event header. Abstract Event Common fields which are embedded into event headers. Event Id + Party Complex Y [1..n] Unique identifier for the business event together with the party that created the Id. Business Event Group Id Complex Y [1..n] Unique identifier for the business event group together with the party that created the Id. A business event group is used to loosely couple different events that have a relationship to one another. A description can be provided within this structure to explain the link between different events. Previous Inaccurate Event Id Complex N Unique identifier for a previous erroneous event, which is being corrected by this event. It is possible that a completely new event is required for a correction, in which case this field can provides an audit trail for the new event being published. Agent Reference Y The agent against the business event. Borrower Reference Y The borrower against the business event. Effective Date Date Y The effective date of the business event. Lender Reference Y The lender against the business event. Cash Payable Reference Y The lender against the business event. Cash Payable Complex N A complex structure which allows the sender to outline the cash movement occurring as a result of the associated business event. Payer Reference Y The payer of the cash flow. Receiver Reference Y The receiver of the cash flow. Net Amount Currency Y The actual amount of the cash flow, net of any withholding tax. Tax Withholding Currency N The amount being withheld. Amount [0..n] Tax Withholding Tax Decimal N The tax rate applied to the withholding. Rate [0..n] Tax Withholding Text N The reason for withholding. Reason [0..n] Comment Text N A free-form text field for additional notes from the sender. Depending on the level of the event there will be appropriate references to the correct assets (parties and assets are defined outside of the event, in the footer of the FpML message). EITHER Facility Event Facility Reference Reference Y The facility to which this event relates. 12

14 OR Facility Contract Event Facility Reference Reference Y The facility to which this event relates. Loan Contract Reference Reference N [0..n] One or more contracts to which the event relates. OR Loan Contract Event Loan Contract Reference Reference Y The loan contract to which this event relates. OR L/C Event L/C Reference Reference Y The letter of credit to which this event relates. 2.3 Reference Data: Assets and Parties Asset and party information is captured at the footer of the FpML message (as per standard FpML procedure). All notification header and business event sections refer to this data. Messages will contain a combination of Facility, Loan Contract and L/C information depending on the type of notification/business event in the body of the message. Asset information can be expressed in the identifier, short form (summary) or full definition. The choice come down to message design (some messages may force a full object), as well as, senders choice of what information they wish to embed. The example below shows a notification type which allows flexibility in terms of which asset structures to embed: Just facility (either identifier or summary) Optionally one or more loan contract (any structure) Optionally one or more L/C (any structure) 13

15 Figure 4: Notification which allows a flexible combination of asset information Party information has been standardized to use the basic FpML party structure. The party id is the only required field but we expect most market participants to communicate party names (at a minimum). 14

16 3 Loan Servicing Facility Events This section defines all the messages that are communicated when facility-level events occur. Facility Event Accruing Fee Change Accruing Fee Expiry Accruing Fee Change Notification Accruing Fee Payment Accruing Fee Payment Notification Accruing PIK Payment Accruing PIK Payment Notification Fixed/Float. Opt. Chg Accruing PIK Opt Chg L/C Opt. Chg Accruing Option Change Notification Commitment Adjust. Facility Termination Facility Notification 3.1 Accruing Fee Change Events Figure 1: Facility events Events are communicated using: Accruing Fee Change Notification Scenario / High-level Business Process Accruing fee rates can vary through the life of a facility based on borrower fundamentals. As these changes occur, it s important for agents to communicate updates to lenders, since it affects their underlying investment return. 15

17 Figure 5: Accruing fee change notification Assuming that lenders already have accruing fees stored as part of the facility structure on their systems, they would simply be updating these details as the accruing fee options changes. Any accrual calculations going forward would take advantage of new rate details. This message allows one of two events to be embedded: Accruing Fee Change: an update to the accruing fee option. Accruing Fee Expiry: expiry of the accruing fee Accruing Fee Change Events: Accruing Fee Change Data Fields Accruing Fee Change Accruing Fee Option Complex Y A full accrual option structure, which replaces any preexisting information. Please see section Error! Reference source not found. Error! Reference source not found. for a full definition of the accrual option data structure Accruing Fee Change Events: Accruing Fee Expiry Data Fields Accruing Fee Expiry Accruing Fee Id Complex Y The unique identifier for the expired fee type at the facility level. Accruing Fee Type List Y The type of fee being expired. 16

18 For expiry purposes, it is not necessary to transmit the full accrual option, just the identifying characteristics. 3.2 Accruing Fee Payment Event Events are communicated using: Accruing Fee Payment Notification Scenario / High-level Business Process The agent bank will request that the borrower makes an accruing fee payment in accordance with the credit agreement. The borrower will make a payment to the agent bank after which the agent bank will calculate each lenders accruing fee amounts. It is important to note that these fees are all calculated based on facility level information. The fee calculation is performed for the life of the contract period and each lender is then subsequently paid. The fee types included in this specification (as of v5.8 publication) are as follows: Commitment Fee: A fee paid by the borrower to keep loan in place until it can be used. For a revolver, the fee paid by a borrower on unused/funded commitments. Utilization Fee: Calculated as a percentage of the utilized portion of the facility. This fee type is subject to banding rules different portions of the utilization amount may be subject to different percentages. Facility Fee: A fee that is paid on a facility's entire committed amount, regardless of usage; it is often charged on revolving credits to investment grade borrowers instead of a commitment fee because these facilities typically have a competitive-bid option (CBO) that allows a borrower to solicit the best bid from it syndicate group for a given borrowing. The lenders that do not lender until the CBO are still paid for their commitment. Ticking Fee: A fee associated with a long-term commitment to provide a Bridge Loan or Credit Facility, which starts accruing the day the Fee Letter is signed (or a specified number of days thereafter) and terminates when the underlying transaction is either consummated or terminated. The Ticking Fee is set forth in the Fee Letter. It is important to note that the FX rate associated with a loan contract can have an effect on the fees charged. For the commitment and utilization fees, since they are calculated on the balance of the utilization, can fluctuate together with the FX rate. It will be important to capture the FX rate schedule in this scenario. 17

19 Figure 6: Accruing Fee Payment Notice 18

20 3.2.2 Accruing Fee Payment Data Fields Accruing Fee Payment Accrual Type Id Alphanumeric Y A unique identifier for a particular accruing fee type. This is the same id that exists on the accruing fee option (stored on the facility). Start Date Date Y The start date against which the on-going fee is due. End Date Date Y The end date against which the on-going fee is due. Amount Currency Y The global and lender share amount associated with the accruing fee. An accruing fee payment can contain an accrual schedule: Fee Accrual Schedule N [0..n] The details of the underlying elements that effect the calculation of a fee accrual. Start Date Date Y The start date of an accrual period. End Date Date Y The end date of an accrual period. Number of Days Number Y The number of days in the accrual period. Reference Amount Currency Y The reference amount upon which the fee calculation is based. Reference Amount List N A definition of what the reference amount is. Type Rate Decimal Y The rate applied to the accrual period. Accrual Amount Currency Y The amount accrued within the accrual period. Fee Accrual Projection N The details of the next payment date/amount. Next Payment Date Date Y The next scheduled payment date for the particular fee type. Projected Amount Currency N The projected amount of the next fee payment. 19

21 3.3 Accruing PIK Payment Notification Scenario / High-level Business Process When a facility allows interest to be capitalized, there are two ways to charge for this feature: An independent PIK (fee) accrual at the facility level. This is usually calculated using the total utilized amount as a reference. An additional PIK margin charged at the loan contract level. This notification is used to satisfy the former use case an independent accrual. Assuming that the PIK rate has been setup at the facility level (at initialization), then this notification is used to process a payment associated with that accrual. The process is pretty simple, works in the same way as any other accrual on the facility. Agent Bank Borrower Lenders Facility initialized with accruing PIK Accruing PIK calc. Accruing PIK payment request Accruing PIK payment Accruing PIK Payment Accruing PIK Payment Data Fields Figure 7: Accruing PIK payment Accruing PIK Payment Start Date Date Y The start date against which the on-going fee is due. End Date Date Y The end date against which the on-going fee is due. Amount Currency Y The global and lender share amount associated with the accruing fee. PIK Accrual Schedule N [0..n] The details of the underlying elements that effect the calculation of a accruing PIK. Start Date Date Y The start date of an accrual period. End Date Date Y The end date of an accrual period. 20

22 Number of Days Number Y The number of days in the accrual period. Reference Amount Currency Y The reference amount upon which the fee calculation is based. Reference Amount List N A definition of what the reference amount is. Type Rate Decimal Y The rate applied to the accrual period. Accrual Amount Currency Y The amount accrued within the accrual period. 3.4 Accrual Option Change Notification Scenario / High-level Business Process Accrual options are stored at the facility level at inception of the asset. These options drive the way in which funds can be utilized through the life of the facility. There are many underlying factors that can affect the pricing (or other details) associated with the accrual option and they can change at any point. Pricing Changes: During the lifetime of a credit agreement there are various factors that can affect the on-going margins and fees charged. Within the credit agreement, there are certain pricing matrices which govern these values. These matrices are usually based on underlying factors: Borrower s financial performance Covenants listed within the credit agreement A schedule documented within the credit agreement The credit agreement usually states that the borrower must submit certain financials to the agent bank on a regular (pre-defined) basis. These financials are reviewed by the agent bank and can lead to pricing changes. This scenario refers to the communication of these potential pricing changes to the lender community. This notification is designed for agents to be able to communicate updates of accrual options to the lender community. The design allows agents to transmit new accrual options (in their entirety), enabling lenders to overwrite existing options. The options that require updates through this notification include: Floating rate options Fixed rate options Accruing PIK option L/C options 21

23 Agent Bank Borrower Lenders Monitor status Borrower event Re-state accrual option New accrual option agreed Accrual option change notification Figure 8: Accrual option change notification Assuming that lenders already have accrual options stored as part of the facility structure on their systems, they would simply be updating these details as the accrual options changes. Unlike accruing fees, it is important to remember that accrual options are just options. They are reference points for loan contract accrual periods. When, for example, the spread on an accrual option changes then the effect on outstanding contracts (using the updated option) could vary in the following manner: 1. Only the accrual option is updated, no contracts using that option are outstanding. 2. Even though there are outstanding contracts using the updated option, only the option is updated. All outstanding contracts will be re-priced at the next rollover. 3. The accrual option and all outstanding contracts must be updated immediately (mid-accrual period). 4. The accrual option and three out of five outstanding contracts must be updated (mid-accrual period). The other two contract will be updated at the next rollover. The body of the event needs to be flexible enough to therefore handle all of the scenarios stated above. This is achieved by providing a choice between which accrual option types to update, together with the ability to provide references to zero or more contracts or L/Cs which require updating Accrual Option Change Data Fields Accruing Fee Change EITHER Fixed Rate Option Change Complex N A full accrual option structure, which replaces any preexisting information. 22

24 Loan Contract Reference Reference N [0..n] Loan contracts that require updating due to an accrual option change. OR Floating Rate Option Change Complex N A full accrual option structure, which replaces any preexisting information. Loan Contract Reference Reference N [0..n] Loan contracts that require updating due to an accrual option change. OR Accruing PIK Option Change Complex N A full accruing PIK option, which replaces any pre-existing information. OR L/C Option Change Complex N A full accrual option structure, which replaces any preexisting information. L/C Reference Reference N [0..n] Letter of credits that require updating due to an accrual option change. Each option change structure simply contains a full accrual option, which the lender can extract and apply to their facility structure. 23

25 3.5 Facility Notification - Commitment Adjustment Scenario / High-level Business Process There are many scenarios where the commitment level of a facility can be adjusted. This adjustment may or may not be related to an actual cash flow occurring between the borrower and lenders. Drivers for commitment adjustments include: Amortization schedule. PIK capitalization on an existing facility. Unscheduled repayment against a non-revolving facility. Agent Bank Borrower Lenders Commitment adjustment Process Simple scenario based on a scheduled commitment adjustment Confirm commitment adjustment Commitment adjustment Figure 9: Simple commitment adjustment Commitment Adjustment Data Fields Commitment Adjustment Refusal Allowed Flag Y Can the lender refuse the commitment adjustment? Scheduled Flag Y Defines whether the commitment adjustment was scheduled. PIK Flag Y Defines whether the commitment adjustment occurred due to PIK capitalization. Facility Commitment Complex Y The commitment amount after the adjustment has taken place. This can also be defined at the global and lender share levels. Commitment Text List Y Increase or decrease. Adjustment Type Commitment Adjustment Amount Currency Y Amount of the commitment adjustment on the global and lender share levels. 24

26 Commitment Schedule N [0..n] Date Date Y Date of a future commitment adjustment. Commitment Adjustment Type Commitment Adjustment Amount Text List Y Increase or decrease. Currency Y Amount of the commitment adjustment on the global and lender share levels. Remaining Currency Y Amount of remaining commitment on the global and lenders share levels. 3.6 Facility Notification Facility Termination Scenario / High-level Business Process This is a simple notification alerting lenders that a facility is terminating. Termination usually refers to the untimely/unplanned cancellation of a facility Facility Termination Data Fields There are no specific fields associated with the termination notice. The presence of the notice, together with the event header information suffices to alert lenders to a facility termination. 25

27 4 Loan Servicing Facility/Contract Notifications This section defines all the messages that are communicated when facility-contract level events occur. These events are at the facility level but can optionally be applied to loan contracts. Facility Contract Event Non-Recurring Fee Payment Group Amendment Breakage Facility Extension Funding Upfront Waiver Misc* Facility Rate Change Group Default Rate Change Default Rate Expiry Man. Cost Rate Chng Man. Cost Rate Expiry Penalty Rate Change Penalty Rate Expiry Figure 10: Facility contract events 4.1 Non-Recurring Fee Payment Notification Scenario / High-level Business Process There are cases where the borrower may be required to make a non-recurring fee payment. This will usually be based on a certain business event occurring. The rules as to how much is charged will be stated in the credit agreement. The only fee type covered in this section is: Amendment Fee: A fee charged to the borrower for an amendment being made to the originally agreed credit agreement. The fee is based on a rate (as stated in the agreement) applied to the current commitment level. Breakage Fee: A fee associated with an early repayment of a loan. Facility Extension Fee: This fee represents any fee paid by the borrower to the syndicate lenders for extending an existing facility. Funding Fee: Fee associated with the funding requirements for given facility. Upfront Fee: This fee is also known as Participation Fee, Arrangement Fee etc. This fee represents compensation to the members of the lending syndicate (and sometimes to institutional investors as well) in return for their commitment of capital. Waiver Fee: This fee represents any fee paid by the borrower to the syndicate lenders/ agent bank for accepting /processing waiver request. Waiver request is sent by the borrower to obtain approval from the syndicate lenders for any of their requirement, which is outside the terms of the agreement. Misc. Fee: Since the non-recurring fees are well-defined, this category will satisfy any fees not already covered by the pre-determined list of fee types. 26

28 4.1.2 Non-Recurring Fee Payment Data Fields Fee Payment The details of a payment made by the borrower to the agent bank related to a given non-recurring facility or loan contract fee. Amount Currency Y The amount of non-recurring fee paid. No other data is required since each event is associated with a fee type. All other details are available on the event header. 4.2 Facility Rate Change Notification Scenario / High-level Business Process There are certain additive rates that can apply to outstanding loan contracts, depending on the borrower s status. These rates can change over time and must be communicated by agents to the lender community. In the same manner as accrual option changes, these rate changes can affect outstanding contracts. It is important that senders have the ability to apply rate changes to appropriate contracts, when applicable. Facility contract events provide the ability to reference a single facility but multiple contracts. These rate may either change or might expire; both sets of events are provided. Agent Bank Borrower Lenders Monitor status Borrower event Re-state facility rate New facility rate agreed Facility rate change notification Figure 11: Facility rate change process 27

29 4.2.2 Non-Recurring Fee Payment Data Fields Facility Rate Change: - Default Rate The new rate applicable to the facility and any applicable contracts. Change - MCR Change - Penalty Rate Change Rate Decimal Y The amount of non-recurring fee paid. Facility Rate Change: - Default Rate Expiry The rate is expired within the facility and any applicable contracts. - MCR Expiry - Penalty Rate Expiry No additional data required 28

30 5 Loan Servicing Loan Contract Notifications This section defines all the messages that are communicated when loan contract level events occur. These events are at the contract level and may apply to one or more contracts. Loan Contract Event Borrowing Int. Capitalization Interest Payment Loan Contract Adjust. Loan Contr B.Rate Set Loan Contr Mat.Chg. Repayment Repayment + Commitment Adj. + Breakage Prepayment Notification (Combination of events) Loan Contract Notification Base Rate Set + Borrowing + Commitment Adjust.+ Int. Capitalization + Interest Payment + Repayment Rollover Notification (Combination of any number of the above events) Figure 12: Loan contract events 29

31 5.1 Loan Contract Notification - Borrowing Scenario / High-level Business Process As shown in Figure 13, the borrower will provide the agent bank with a written notice requesting a new borrowing against an existing facility. The agent will receive the notice and calculate the amount of principal due from each lender based on their respective share of the underlying utilized commitment. A borrowing notice will be created by the agent bank for each of the lenders. Each of the lenders will receive it and make a payment to the agent bank. The agent bank will then make a single subsequent payment to the borrower. Please note that the scenario also illustrates the situation where the agent bank may opt to make a payment to the borrower before payment from the lenders (this situation is a common occurrence in Europe). Agent Bank Borrower Lenders Written borrowing request Make borrowing payment In Europe, payment could be made by the agent, creating lender receivables. Calculate lender amounts Borrowing notice Make borrowing payment Borrowing payments Only if the payment hasn t already been made. Figure 13: Borrowing Notification Process Borrowing Data Fields The notification from the agent bank to lender that loan contract is requested by the borrower. A loan contract notice will be created by the agent bank for each of the lenders. Borrowing Borrowing Amount Currency Y The amount that the borrower wishes to draw. 30

32 Condition Precedent Met Text List N An enumeration which describes whether the condition precedent have been met, not met or been waived. Please note: this field in not required since conditions precedent may not be applicable in certain scenarios. 31

33 5.2 Loan Contract Notification - Base Rate Set Scenario / High-level Business Process At the time that the borrowing notice is sent out by the agent bank, the interest rate to be applied to the contract is not always known. The agent bank will therefore send out the borrowing notice without the interest rate information and then provide the interest rate details in a separate Base Rate Set Notice. The advantage of separating these two notices is to provide the lender with as much advance notice as possible of the pending upcoming contract. Agent Bank Borrower Lenders Calculate lender amounts Written borrowing request Borrowing notice (no rate) Base rate set notice Borrowing payments Make borrowing payment Figure 14: Base Rate Set Process Base Rate Set Data Fields Base Rate Set Fixing Date Date Y The date on which the base rate was set. Rate Decimal Y The base rate. 32

34 5.3 Loan Notification - Interest Payment / Interest Capitalization Scenario / High-level Business Process The agent bank will request that the borrower makes an interest payment. In some cases the borrower has the option of capitalizing the interest. Both the interest payment and capitalization notifications are identical (covered by this section). The interest calculation is performed for the life of the contract period and each lender is then subsequently paid based on their individual balances and the interest rate throughout the period. Figure 15: Interest Payment Notice Business Process Interest Payment/Capitalization Data Fields Interest Payment/Capitalization A payment requested by the agent bank from the borrower, for each lender. Interest notices are contractspecific. Start Date Date Y The start date of the interest period. End Date Date Y The end date of the interest period. Interest Calculation Method Text List Y Agent bank allocation of interest payments: (i) pro-rata at the time of the interest payment or (ii) based on the loan contract share throughout the interest period. Global Interest Amount Currency Y Interest amount paid by the borrower to the agent bank. Share Interest Amount Currency Y Interest amount paid to the specific lender. Interest Accrual Schedule N [0..n] A schedule that incorporates all sub-periods of an interest accrual calculation. Start Date Date Y The start date of an accrual period. 33

35 End Date Date Y The end date of an accrual period. Number of Days Number Y The number of days in the accrual period. Reference Amount Currency Y The reference amount upon which the fee calculation is based. Reference Amount Type List N A definition of what the reference amount is. Rate Decimal Y The rate applied to the accrual period. Accrual Amount Currency Y The amount accrued within the accrual period. 5.4 Loan Notification - Repayment Scenario / High-level Business Process The agent bank will request that the borrower makes a principal repayment. The borrower will make a payment to the agent bank after which the agent bank will calculate each lenders principal repayment amount. The principal calculation is performed based on the position that the lender is currently holding and each lender is then subsequently paid Repayment Data Fields Figure 16: Principal Repayment Process Facility Repayment Representation of a principal repayment shown at the facility level. Global Repayment Amount Currency Y Global principal amount paid by the borrower to the agent bank. Share Repayment Currency N Principal amount paid to the specific lender. Amount Repayment Price Decimal Y Price at which the repayment occurred. Usually at par. Refusal Allowed Flag Y Defines whether the lender has an option to accept or deny the payment. 34

36 Borrower Mandatory Flag Y The repayment can be smandatory or voluntary from the borrower s perspective. Scheduled Repayment Flag Y Determines whether the repayment was pre-determined based on a scheduled defined within the credit agreement. 5.5 Loan Notification - Adjustment Scenario / High-level Business Process There may be situation where an agent is required to make an adjustment to the notional balance against an existing loan contract. This is a simple message allowing the adjustment to occur Adjustment Data Fields Adjustment Adjustment of principal against a single loan contract. Adjustment Amount Currency Y Global and lender share loan contract amount adjustment. Adjustment Type List Y Defines an increase vs. a decrease. Loan Contract Amount Currency Y The global and lender share loan contract amount AFTER 5.6 Loan Notification Maturity Change Scenario / High-level Business Process the adjustment. There may be situation where an adjustment to the maturity date associated with an existing loan contract, is required Maturity Change Data Fields Maturity Change Adjustment of maturity against a single loan contract. Current Maturity Date Date Y The new maturity date of the loan contract. Prior Maturity Date Date N The previous maturity date of the loan contract. 5.7 Prepayment Notification Scenario / High-level Business Process Certain repayments can be made by the borrower, against any outstanding contracts, outside of regular repayment schedules: Unscheduled Mandatory Principal Repayments: Mandatory repayments are the result of restructuring or change in the credit agreement which has had the effect of requiring a principal repayment (this could result in a pre-payment fee). Unscheduled Voluntary Principal Repayments: Voluntary repayments are simply due to the borrowers desire to make a repayment (this also may be subject to a breakage fee). 35

37 In both of the scenarios above, the lender may have the option of either accepting or refusing the repayment (the lender also has the right to accept a portion of the repayment). It is up to the agent bank to communicate which repayments are optional from the lenders perspective. It is also noted that the lender cannot choose which contract to accept. The agent bank makes a determination based on the acceptance levels and will reduce contracts on a pro-rata basis amongst the accepting lenders. It has been agreed that two-way communication for this event has been re-prioritized to Phase 3/4 development. This section only describes the final notification that is made AFTER all votes for inclusion in a non-scheduled prepayment have been defined Prepayment Data Fields Prepayment Repayment Complex Y A repayment structure. Commitment Adjustment Complex N A potential commitment adjustment associated with an early repayment. Breakage Fee Complex N A potential breakage cost associated with an early repayment. 36

38 5.8 Loan Notification - Rollover Scenario / High-level Business Process Loans are usually based on an underlying rate (usually LIBOR). These quoted rates are usually of shorter tenor than the facility within which a particular loan is contained (e.g. 3 month LIBOR). These shorter tenor loans must undergo a rate reset process, which allows the lender to re-establish the underlying rate associated with the loan. This process is termed a rollover within the syndicated loan market. During a rollover, it is possible that the borrower may: Repay principal Pay or capitalize interest Combine or split multiple outstanding loans into a different borrowing configuration Figure 17: Loan Rollover Notice The rollover structure is designed to be flexible, in order to accommodate any combination of the above events. Due to the disjoint nature of maturing and new loan contracts, it is possible to model both simple and complex rollover situations, as long as, the connection between the old contracts and new ones are implicitly defined (as two simple lists of contracts). Therefore, it is NOT possible to easily relate specific old contracts to specific new contracts. There is no relationship between any two old/new contracts. Re-iterating, the only renew relationship that exists is the fact that all the loan contracts are shown within a single rollover structure. 37

39 5.8.2 Rollover Notice Data Fields Rollover Maturing Contracts Complex Y Definition of all maturing contracts. The message allows either identifier, summary or full asset structures to be defined in this field. Current Contracts Complex Y Only full asset definition can be defined here. During a rollover, lenders need to construct the new contracts. This current contracts element allows them to review and store all new contract details. Base Rate Set Complex N [0..n] Borrowing Complex N [0..n] Commitment Adjustment Complex N [0..n] Interest Capitalization Complex N [0..n] Interest Payment Complex N [0..n] Repayment Complex N [0..n] 38

40 6 Letter of Credit Notifications There are certain types of facilities (usually revolvers) that can be utilized by letter of credits (LCs). In this case, the borrower is requesting that an LC be granted to a beneficiary (usually someone who does business with the borrower), thus protecting the beneficiary in the case where the borrower fails to make a payment to them, in their normal course of business. In the event that the borrower fails to make a payment to the beneficiary, the beneficiary can immediately request funds from the issuing bank, and the issuing bank must then be reimbursed by either the borrower or the lenders. If the lenders decide to provide funding, then the LC is effectively transformed into a loan contract. A number of notifications exist in order to manage the L/C lifecycle. L/C Event L/C Adjustment L/C FX Revaluation L/C Issuance L/C Iss. Fee Pay. L/C Rate Change L/C Renewal L/C Termination L/C Notification Figure 18: L/C notifications 39

41 6.1 L/C Adjustment Throughout the life of a letter of credit, it is possible for the borrower to either increase or decrease the notional value of the L/C. These balance changes are subject to the rules stated on the credit agreement. Once the global balance changes, it is important for the agent bank to communicate the position level shifts to each of the lenders. The issuing bank communicates the updated balance to the beneficiary. Two main scenarios exist: The balance of the L/C can shift on request from the borrower due to a change in the financing requirement between the borrower and the beneficiary of the L/C. This does not result in any further cash flows but simply requires a restatement of the L/C agreement. The L/C balance of the L/C can shift based on the fact that there has been a failure to pay on the part of the borrower to the beneficiary. The beneficiary draws funds against the L/C, which results in the L/C amount being reduced and a new loan drawing taking place. The L/C reduction and new loan notional should match. Figure 19: Letter of Credit Balance Notice 40

42 6.1.1 L/C Adjustment Data Fields In addition to the basic L/C description fields, it is important for validation, to signify whether this is just a basic balance change or whether there will be any related borrowing adjustments in line with the L/C reduction. L/C Adjustment Adjustment Complex Y Increase or decrease. Amount Currency Y The amount of the adjustment. Related Borrowing Flag Y Set to false for a normal increase or decrease in the letter of credit amount. If set to true, it signifies that a loan borrowing will take place in conjunction with this business event. 6.2 L/C FX Revaluation Scenario / High-level Business Process L/Cs currencies are somewhat flexible with respect to currency denomination. The L/C itself can be issued in a currency other than the facility currency and the L/C accrual can occur (and be paid) in yet another currency L/C FX Revaluation Data Fields L/C FX Revaluation L/C FX Rate Complex N The FX rate associated with the L/C accrual. This is relative to the L/C currency. Facility FX Rate Complex N The FX rate associated with the L/C itself. This is relative to the facility currency. 6.3 L/C Issuance The L/C issuance notice is used to initiate a new L/C. A full L/C definition should be communicated with this notification. 41