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What is the fee letter?

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The fee letter is a private document between mandated lead arrangers and borrowers that identifies the type and amount of fees payable by the borrower with respect to a syndicated facility based on the role of the syndicate participant (lead arranger, co-underwriter and participant lender), the bracket amount of the total comment (tier) that each participant lender subscribes for as well as administrative agency fees.  It includes arrangement and structuring fees, underwriting fees, administrative agency fees, collateral agent fees and generally also the market flex language.

Details of the fees are usually put in a separate side letter to the underlying facility agreement to ensure its confidentiality.  The fee letter is finalized and the fees are usually payable upon the signing.

Fee letters will also be provided to those institutions that have performed particular roles or taken on greater responsibility in the loan process, primarily the arrangers, the facility agent and the security agent.

The fee letter reflects the fee structure, which does not influence the number of lenders in a syndicate.  Although the fee letter is not shared with syndicate participants, the fee structure incorporates the anticipated costs participant lenders incur in providing liquidity insurance in the event of borrower illiquidity and associated with workouts.

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