7 Crucial Steps Administrative Agents Take in Bankruptcy
When a borrower declares bankruptcy, an administrative agent takes several steps to protect the interests of creditors:
- Continued Administration: The administrative agent continues to manage the loan facility, including processing payments and maintaining the loan register. 37
- Coordination with Lenders and Counsel: The agent coordinates with lenders and their counsel to address issues related to the bankruptcy, including reviewing and commenting on documents filed in bankruptcy court. 37
- Proof of Claim: The administrative agent prepares and files a proof of claim on behalf of the lenders to ensure their interests are represented in the bankruptcy proceedings. 37
- Adequate Protection: The agent works to ensure that secured creditors receive adequate protection of their claims, which may include post-petition interest on their collateral. 5
- Enforcement Actions: Acting at the direction of the lenders, the administrative agent may need to take enforcement actions, such as declaring events of default, enforcing remedies, and foreclosing on collateral. 37
- Communication: The agent facilitates information sharing between the lenders and the borrower, ensuring that all parties are informed about the status of the bankruptcy and any relevant developments. 37
- Compliance with Automatic Stay: The administrative agent must comply with the automatic stay provisions of the Bankruptcy Code, which prevent creditors from taking certain actions against the debtor or its property without court permission. 5
- Participation in Bankruptcy Hearings: The agent may participate in various hearings before the bankruptcy court, including those related to adequate protection, lender treatment, and plan-distribution mechanics. 7