SD-04.12 — Loan Monitoring & Workout

Business Domain: BD-04 Direct & Co-Investment (Front office) · Applies: PRIV

Purpose

Manages a directly-originated private loan through its life — the post-close discipline of direct lending. Direct private credit runs the BD-04 deal chain like any other direct investment — originated, underwritten, structured, approved and closed — but its post-close phase is neither company stewardship nor real-asset operations: it is credit management. This Service Domain owns it — monitoring the borrower against the loan’s covenants, processing the changes the loan needs over its life, and working out the positions that deteriorate. It is the third of BD-04’s post-close disciplines.

Service Operations

• Monitor covenant compliance — track the borrower against the loan’s maintenance covenants and reporting obligations.
• Monitor borrower performance — track the borrower’s financial and operating performance against the underwriting case.
• Process amendments and waivers — handle the amendment requests, waivers and consents a loan needs over its life.
• Run amend-and-extend — negotiate the extension of a loan’s maturity and terms.
• Manage credit deterioration — watch-list a deteriorating credit and step up the monitoring.
• Execute workout and restructuring — restructure a distressed position, and manage default, enforcement and recovery where the credit fails.

Inputs and outputs

• Inputs: the closed direct loan (SD-04.6); the borrower’s reporting; the covenant package from SD-04.4.
• Outputs: the covenant-compliance and borrower-performance record, the amendment record and the workout outcome — feeding SD-04.9 at repayment or loan sale, and BD-07 Investment Risk and BD-09 Performance & Analytics.

Entities

• Consumes: Legal Entity (E-01) — the borrower; Transaction (E-05); the SD-04.4 covenant package; the SD-04.6 closed direct loan.
• Owns: PM-14 Direct Loan — the directly-originated private loan as a first-class entity: borrower, originator, facility type, commitment / drawn / undrawn, interest-rate structure (including PIK toggle and default-rate trigger), maturity, covenants, payment schedule, seniority rank, collateral pool, workout status and recovery estimate. PM-14 specialises E-02 Instrument / Asset with instrument_class = direct_loan; the position the firm holds in the loan is E-04 Holding / Position. The covenant-monitoring, amendment-processing, watch-listing and workout / restructuring operations all run over PM-14.

Standards

• The credit-agreement conventions and the Loan Market Association / Loan Syndications and Trading Association documentation standards; the amend-and-extend and workout / restructuring practices of the direct-lending market.

Open extensions

• The boundary with BD-12 on loan servicing and administration — SD-04.12 owns the credit-management decisions; the operational servicing is BD-12’s.
• The amendment-and-waiver sub-model on PM-14 — how amendments to a facility flow through the loan record without losing the original terms.
• The workout / restructuring sub-model — the typed structure of a restructured facility, and the relationship between an original PM-14 record and a restructured replacement.