A shared collateral pledge and security agreement is a funding arrangement in which the borrower avails a loan from a group of lenders by pledging common collateral acceptable to the lenders consortium and securitizes the loan by transferring the common collateral in favor of the lenders consortiumand held in an escrow account maintained by a third party escrow agent.
The lenders consortium appoints a lead agent to represent them in all the transactions and the escrow agency is appointed by both the borrower and the lead lending agent and the transaction is facilitated by an escrow agreement enacted between the escrow agency and both the entities involved in the loan process and this agreement forms a part of the master shared collateral pledge and security agreement. All the clause of the master agreement should be drafted with proper due diligence in order to be impartial and protect the rights of both the lenders and the borrowers and should specifically articulate the lending specifics, the repayment terms, the terms and conditions for release of security from the escrow agency and the detriments and steps the lenders would take in case of default.
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