The insolvency of Lehman Brothers and certain Icelandic
banks has highlighted issues with the ability of lenders to
fund the re-drawing of rollover loans under syndicated
revolving credit facilities.
Some commentators have put forward proposals for an agent
bank to effect a rollover of a revolving credit loan without
requiring the actual repayment and redrawing of funds. But
these require intervention by the agent bank, which may expose
it to liability.
A typical rollover Typically, under the terms of a revolving
credit facility, the borrower is required to repay and redraw
borrowings at the end of their interest period (the maturity
date). This contrasts with term loan facilities where loans are
repaid only on the final repayment date. The process of
repaying and redrawing is known as rolling over. The loans that
are repaid and redrawn are referred to as rollover loans. The
borrower will rollover a loan on the maturity...