When browsing through the company site of any major corporate law firm, headlines such as “White & Case advises Huvepharma on €130 million credit facility” can be found. Major law firms advise their clients on complex financial transactions to enlighten them on the legal implications of these transactions. In the case, UK law firm White & Case advised Huvepharma, a global pharmaceutical company on a ‘credit facility’, with an unnamed lender. Before advising Huvepharma about the legal implications of this transaction, corporate lawyers at White & Case must understand the mechanics of credit facilities themselves.
What Are Credit Facilities?
A credit facility is a specific type of loan, which, like all loans, involves a ‘borrower’, a company or an individual, and a ‘lender’ also called a ‘creditor’, which is usually a financial institution. Credit facilities are distinguished from other loans as they allow the borrower to withdraw funds from a pre-determined ‘pot’ at any given time over a prolonged period. They are distinguished from other loans, in which the borrower must apply for a new loan each time they want to access new funds. This makes credit facilities beneficial to borrowers as they can access funds immediately and on a flexible basis, particularly to finance projects which will last over a longer period and do not have a clear pre-determined cost. Credit facilities can be compared to a consumer credit card. An individual may withdraw funds from a certain, capped quantity of ‘credit’ or money whenever they want. Eventually, the individual will be forced to repay the amount they have spent. In the case of credit facilities, repayment can be structured in various ways; the structure of repayment is to be decided by the parties and is an area in which corporate lawyers may advise either party.
What Are the Types of Credit Facilities?
In corporate law, three types of credit facilities are generally outlined: committed, uncommitted, and revolving. These three types differ with respect to several aspects, but most notably, in the obligations of the creditor and in the intervals of repayment. In a committed credit facility, the creditor and the borrower agree on specific conditions that the borrower must meet before the creditor makes a credit facility available. These conditions may include the proof of ‘existing indebtedness’, requiring the borrower to prove that all existing debts have been paid off, or anti-money laundering guarantees inter alia. Once the borrower has met the ‘conditions precedent’ the creditor is legally bound to extend the credit facility. In committed credit facilities, the borrower can terminate the facility at will, while the creditor is only able to terminate the facility if the borrower fails to meet predetermined obligations. In most committed credit facilities, it is agreed upon beforehand that the creditor can terminate the facility in the case of ‘default’ in repayment by the borrower, though the parties may agree on other grounds for termination by the creditor. By contrast, in an uncommitted credit facility, the creditor has no obligation to lend to the borrower and may terminate its contributions to the facility at any time on a case-by-case basis. Pursuant to this, the borrower is also not under any obligation to borrow from the facility and like the creditor can terminate the facility at any time. Because the creditor’s contributions to uncommitted credit facilities are not guaranteed, they are often negotiated on a short-term basis, serving as a temporary source of additional funds for the borrower. Revolving credit facilities are a subcategory of committed credit facilities, meaning the creditor is obliged to extend the facility if the borrower continues to meet the predetermined conditions. However, revolving credit facilities vary significantly in their repayment structure. While most facilities involve repayment upon the expiration of the facility, revolving credit facilities allow the borrower to borrow and repay on a regular basis. For this reason, revolving credit facilities typically do not have a fixed expiration date, as the creditor continues to pay into the facility, while the borrower continuously repays at regular intervals. The job of corporate lawyers is to advise their clients on the type of credit facility which best suits their needs and on how they can secure their specific interests throughout the period of the facility's activity.
What Are the Elements and Interests of The Parties Within Credit Facilities?
Credit facilities include a set of ‘covenants,’ or promises made by the borrower to the creditor. These may include promises to do something, ‘positive covenants’, such as guaranteeing to maintain insurance throughout the duration of the credit facility, but also promises not to do something, ‘negative covenants’, such as committing not to undertake any mergers or acquisitions without the consent of the lender. Credit facilities may also include additional fees, like withdrawal fees which are applied every time funds are taken out by the borrower. Corporate lawyers must negotiate these fees and covenants between the parties to protect separate interests. The goal of a borrower is typically to make covenants easy to comply with, as they want to secure their access to the funds of the facility and want to reduce compliance costs. Moreover, borrowers aim to negotiate fees attached to the facility as low as possible. Conversely, the creditor strives to negotiate covenants which provide sufficient protection, perhaps allowing them to more flexibly terminate the facility and to ensure the borrower repays on time. In addition to positive and negative covenants, the parties to the credit facility may negotiate ‘financial covenants’, which require the borrower to remain within specified financial parameters. Financial covenants may include requiring the borrower to maintain a certain net worth or a certain ‘gearing ratio’, the ratio of debt to net worth. Financial covenants are essential to the creditor, serving as a health check that allows the creditor to assess the risk of default as well as the value of the borrower’s assets should default occur. Financial covenants help enable the creditor to make safer choices when choosing whether to continue contributing to a credit facility. Another element, which is often negotiated into credit facilities to make the creditor resistant to defaults in repayment by the borrower are securities. Securities for credit facilities are assets of the borrower, like physical or intellectual property, or shares in a company, which serve as a guarantee for the repayment of a loan. The creditor will take ‘title’ of the asset for the duration of the facility. If the borrower fails to repay the loan the creditor may have the power to sell the asset to regain the value lost. When the borrower repays all their debts, usually upon the expiration of the credit facility, the borrower will regain control over their assets. While securities offer benefits for both parties, allowing the borrower to negotiate access to larger amounts in the credit facility and reducing overall financial risk of default for the creditor, they also pose certain risks. For example, as the borrower risks losing key assets and may experience reduced autonomy, as they may be restricted from selling or reorganising assets under security. Moreover, securities can lead to the borrower incurring costs, like the costs of enforcing a security, and assets taken under security may ultimately be difficult to sell. For this reason, corporate lawyers must negotiate terms which balance risks and benefits for both parties.
How Do Credit Facilities Play Out in Practice?
Returning to the initial headline, “White & Case advises Huvepharma on €130 million credit facility” the steps which lawyers at White & Case need to take to advise Huvepharma can be examined chronologically. Firstly, and most importantly, White & Case will need to recommend the type of credit facility Huvepharma should request. This will depend on the purpose of the facility, as well as the financial stability of the Huvepharma in the eyes of the borrower. Huvepharma plans to use the funds to research veterinary pharmaceuticals; research is often long-term and costs may change over time. Therefore, Huvepharma may want to negotiate a committed credit facility to guarantee secure funds over a longer period, however, this will require Huvepharma to meet certain conditions and have financial documents in order. Alternatively, if the lender wishes to impose an overly stringent conditions precedent on Huvepharma, White & Case may advise Huvepharma to propose a revolving credit facility, which would provide protections to the creditor against default, while securing access to the credit facility over a longer duration. Additionally, White & Case will need to advise Huvepharma on how to go about covenant negotiations with the creditor. Advising lawyers should aim to protect Huvepharma interests in making covenants as easy as possible to comply with, while being realistic about the inevitable demands the creditor will make. Overall, the goal of lawyers in negotiating credit facilities is to strike a balance between the converse financial interests of the borrower and the creditor to ensure stability for both parties.
Sources
Australian Securities and Investments Commission. “Security for a Loan.” Moneysmart.gov.au. Accessed November 1, 2025. https://moneysmart.gov.au/glossary/security-for-a-loan.
Cornell Law School, Legal Information Institute. “Credit Facility.” LII / Legal Information Institute. Accessed November 1, 2025. https://www.law.cornell.edu/wex/credit_facility.
Kauko, Karlo, et al. “Corporate Credit Risk Affected by Business Cycles and Industry Factors.” Bank of Finland Bulletin, May 29, 2019. https://www.bofbulletin.fi/en/2019/2/corporate-credit-risk-affected-by-business-cycles-and-industry-factors/. Accessed November 3, 2025.
PwC. Legal Business Solutions Academy: How a Credit Facility Impacts Your Business. 2023. https://www.pwc.co.uk/legal/pdf/how-a-credit-facility-impacts-your-business.pdf.
White & Case LLP. “White & Case Advises Huvepharma on €130 Million Credit Facility.” Whitecase.com, October 20, 2025. Accessed November 1, 2025. https://www.whitecase.com/news/press-release/white-case-advises-huvepharma-eu130-million-credit-facility.