Over the life of a credit facility, borrowers frequently need to modify the terms of their credit agreement — to reset financial covenants after a performance miss, extend the maturity, increase the loan commitment, add new flexibility to execute an acquisition, or respond to changed market conditions. The amendment and waiver process governs how these modifications occur and who must approve them.
A waiver is a one-time forgiveness or modification of a specific obligation or covenant — for example, a waiver of a financial covenant breach for a single testing period. A waiver does not change the underlying covenant going forward; the covenant reverts to its original level for the next testing date. Amendments are permanent modifications to the credit agreement — changing a covenant level, extending a maturity date, modifying the interest rate, or expanding permitted baskets.
Most credit agreements require majority lender consent (typically 50.1% of commitments or outstandings) for most modifications. However, certain provisions require unanimous or supermajority (typically 66.7% or higher) lender consent: reducing the interest rate, reducing principal, extending the maturity date, releasing all or substantially all collateral, and releasing guarantors. These "sacred rights" protect minority lenders from being force-fed terms that directly impair their economic position.
The amendment process is managed by the agent bank, which circulates an amendment request to the lender syndicate, solicits votes, and coordinates execution. In a syndicated deal, assembling the required consent can be time-consuming — particularly for amendments requiring unanimous consent, where any single lender can block the change. Coordination fees are paid by the borrower to compensate the agent and consenting lenders.
Distressed amendments — where a company in financial difficulty seeks to reset covenants or extend maturities to avoid default — are particularly consequential. Lenders granting such amendments must weigh the cost of accommodating the borrower (accepting looser terms) against the cost of the alternative (default, enforcement, and potentially less favorable recovery). The negotiated outcome reflects the relative leverage of the two sides and the lender's assessment of the company's long-term viability.