Any person that incurs an actual or contingent obligation towards another person is an obligor, which includes borrowers and guarantors.  The party (individual or organization) that receives funds in return for contracting into an obligation to repay those funds as specified in a loan agree­ment is a borrower.  A third party that guarantees another party’s debt or contractual performance in the event the other party does not pay or perform is a guarantor.

“Obligor” means a Borrower or a Guarantor.

With provision for the accession of subsidiaries as additional borrowers, a facility agreement and security documentation will typically have a group of borrowers.  The facility documentation will also include a cross-guarantee structure and security arrangements that allow for additional guarantors to accede and additional security to be taken.  Carve outs exclude immaterial subsidiaries from being captured as an obligor.

In US loan agreements, borrowers and guarantors are known as “Loan Parties”.  Under LSTA documentation, “Obligor” excludes the borrower and uses “Borrower/Obligor” to refer to both the borrower and any guarantor.  “Obligor” includes both the borrower and the guarantor under the LMA documentation.

A transaction obligor is any entity in acquisition finance that in addition to the obligors is required to comply with or whose actions are intended to be controlled by the facility document, including shareholders and subordinated creditors.  Acquisition finance is typically structured to exclude sponsors/investors from guaranteeing the debt of the company group.

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