An ancillary facility is a separate facility provided on a bilateral basis in a multilateral structured financing for additional financing or hedging in place of all or part of the lender’s unutilized revolving facility. It can take the form of an overdraft facility, a guarantee, bonding, documentary or stand-by letter of credit facility, a short-term loan facility, a derivatives facility or a foreign exchange facility. Ancillary facilities are incorporated in a revolving credit facility and carved out of the commitment of lenders (usually arrangers), for which a commitment fee and often a drawdown fee is charged.
The revolving loan facility in the LMA template leveraged document includes a letter of credit facility and may incorporate different types of ancillary facilities provided by an issuing bank on a bilateral basis in place of all or part of that lender’s unutilized revolving commitment. The amount of any ancillary commitment is deducted from the lender’s revolving facility commitment and capped at the amount of the commitment.
They comprise those types of facilities that are more appropriately provided by lenders (or, optionally, their affiliates) on a bilateral basis, rather than on a multilateral basis. Although the underlying facility agreement may require provision of ancillary facilities, they are documented separately. The schedules to facility agreements contain the forms of ancillary documentation that may be required throughout the life of the transaction.