Borrowing base facilities—key terms in the facility agreement

Produced in partnership with Dentons

Practice notes

Borrowing base facilities—key terms in the facility agreement

Produced in partnership with Dentons

Practice notes

A borrowing base facility ('BB Facility') is a working capital line designed to provide short term liquidity by way of advances or the issue of trade instruments ('Instrument') such as letters of credit (see: Letters of credit—overview) or demand guarantees (see: On demand guarantees/bonds—overview). It is a type of trade finance. For information on borrowing base facility structures, see Practice Note: Borrowing base facilities—structure, key terms and risks.

BB Facilities are usually used to finance a pool of traded assets with high price volatility. A typical borrowing base facility agreement will include provisions which focus on those assets and their value.

For information on the security arrangements in borrowing base facility structures, see Practice Note: Borrowing base facilities—taking security.

Committed or uncommitted facility

BB Facilities have traditionally been made available on an uncommitted basis, although committed BB Facilities are also common. An uncommitted facility is one under which the lender has no obligation to lend or issue an instrument and does so entirely at its discretion if requested by the borrower.

The

Jurisdiction(s):

United Kingdom

Key definition:

Term definition

What does Term mean?

The period of time from when a loan is borrowed to its final stated repayment date

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