UK Law and Practice Contributed by: Fergus Wheeler, Paul Yin, Tracy Liu and Medha Vikram, Latham & Watkins
• compliance with rules for senior managers and material risk takers; • compliance policies for risk management, market abuse, conduct and staff training; • maintenance of regulatory capital; and • reporting on FCA metrics related to regulatory compliance. UK-regulated lenders or those registered with the FCA for AML purposes have ongoing AML reporting obli - gations. The FCA remains focused on valuation practices, conflicts of interest management, and risk manage - ment. It published findings from a review of valuation practices in March 2025, identifying various areas for improvement. 2.5 Club Lending and Antitrust Private credit providers can offer sole underwrites or participate in club deals for large transactions on com - petitive terms. Forming such clubs has not encoun - tered any regulatory barriers. 3. Structuring and Documentation 3.1 Common Structures Structures Common structures include: • unitranche (term + delayed draw facility) by private credit lenders, with a super senior revolving facility from a bank; • Holdco facility by private credit lenders, with traditional syndicated structures at Opco level (eg, syndicated loans or high-yield bonds); • subordinated debt by private credit lenders along - side senior secured financing (syndicated loans or high-yield bonds); and • preferred equity. Revolving and Delayed Draw Facilities Private credit lenders often provide a delayed draw/ acquisition-capex facility, a term loan available post- closing (eg, three years) for bolt-on acquisitions. They do not typically provide revolving credit facili - ties (RCFs) or ancillary facilities. For tight acquisition
timelines, private credit lenders may offer a hollow tranche revolving facility for a limited period (eg, 90 days), functioning like a term facility, expected to be replaced by an RCF. Unplaced commitments by the timeline’s end are cancelled or treated as term facility commitments. Many direct lenders collaborate with RCF providers to leverage intercreditor synergies for sponsors. 3.2 Key Documentation Typical documentation for private credit transactions includes the following. • A facilities agreement, which covers commercial terms, representations, undertakings, events of default, transfers, amendments and loan mechan - ics. • An intercreditor agreement, which governs rights between creditor classes. Unlike evergreen inter - creditor agreements which are typical in syndicated markets, private credit intercreditor agreements are specific to debt classes and terms between uni - tranche and super senior RCF lenders. In Holdco facilities, private credit lenders are not typically party to Opco-level intercreditor agreements but enter a subordination agreement for shareholder debt. • A fee letter, which documents agreed fees and payment terms. First-Out-Last-Out (FOLO) Transactions The rise of collaborative structures like unitranche and super senior debt has reduced FOLO transactions. When used, FOLO transactions are documented under a single credit facility, with a side agreement dividing the loan into first-out and last-out tranches. The higher-risk last-out tranche offers a higher margin, aligning with different lenders’ risk preferences. 3.3 Restrictions on Foreign Direct Lenders In England, foreign lenders do not typically need authorisation to make loans unless engaging in “reg - ulated activities” related to “specified investments” under the Financial Services and Markets Act 2000 (FSMA). “Regulated activities” that require authorisa - tion under Section 19 of the FSMA include accepting deposits, dealing in investments as principal or agent, arranging deals, managing and advising on invest -
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