BankingCash & Working Capital

Talking Shop: The Philosophy of Fees on Revolving Credit Facilities

By September 17, 2020 No Comments

Question:  “Do you pay the same arrangement fee for a 364-day revolver renewal as for a 5-year renewal?”

“We executed our first 364-day revolving credit facility last year (in addition to a five-year) and it is time to renew the 364-day facility. We only have 50% of the banks participating in the 364-day renewal.

  • We were thinking to pay a proportionate amount of arrangement fees to the lead banks. I don’t think they have to do very much since we have contacted all the banks; however, our lead arranger bank has suggested we should pay exactly the same arranger fee, i.e. a minimum fee.
  • What is your philosophy?”

Peer Member Answer: “We only pay an arranger fee to the admin agent on our 364 day renewal.  When we did the original 364 day deal, we also paid a fee to one other bank (who was the syndication agent).

  • We don’t pay arrangement fees to any of the other JLAs (joint lead arrangers), as they aren’t doing any work (other than what they need to do internally to provide their own commitment) and a 364-day extension is a pretty easy process. 
  • So we only pay those banks that are actively involved in the arrangement process, and not all of the JLAs.” 
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Justin Jones

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