Sponsors Paying for Lender's Legal Fees
Is it market for Sponsors to pay the legal fees of their lenders? Every deal I have seen is set up that way. It seems like a stupid norm. The Sponsor has to pay top dollar so an expensive law firm can defend the interests of the lender and actively negotiate against the sponsor! The lender is incentivized to use a good and expensive law firm, because it helps them get better crafted legal documents, and they don't have to pay a dime, so who cares how much it costs? It is a double whammy.
Has anyone ever seen a Sponsor negotiate out legal fees during the term sheet phase of a deal? Might be a good way to get rid of this obvious conflict of interests.
Yes, every deal is set up this way. You can take the view that the lender is negotiating "against" the sponsor, but in practice, it's typically more collaborative to get an agreement everyone is comfortable with. Even big deals with syndication, there will be a bank involved to negotiate "for lenders" but whose sponsor is the actual client. So it's not quite as one sided for the lenders or antagonistic as sounds like you think.
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