coobligors

Co-obligors are individuals or entities that share legal responsibility for the repayment of a debt under a single loan agreement or related facility. Each co-obligor is typically a primary debtor and is jointly and severally liable for the full amount of the obligations. This means the lender may demand payment of the entire outstanding balance from any co-obligor, regardless of the share, and a co-obligor that pays the full amount may seek contribution from the others. A key distinction is that a co-obligor is bound directly by the terms of the loan agreement, whereas a guarantor generally provides secondary or contingent liability only if the primary obligor defaults.

Co-obligors are common in syndicated or club loans, project finance, and other corporate lending arrangements involving more than one borrower or sponsor. They may include a parent company and its subsidiaries, joint venture partners, or other credit parties named in the facility agreement. The allocation of liability and the remedies available to lenders are set out in the facility agreement, including payment obligations, interest, fees, events of default, and remedies, as well as any cross-default or cross-acceleration provisions. The ability to release, substitute, or reorganize co-obligors, and the treatment of liability among them, are typically governed by contract terms and applicable law, often in conjunction with intercreditor agreements among lenders.

In practice, the use of co-obligors allows lenders to diversify credit exposure and supports larger or more complex financing structures, while increasing the potential impact of default on multiple debtors.