Key update to ACT borrowers’ guide to loan documentation

ACT Borrower’s Guide to LMA Loan Documentation for Investment Grade Borrowers has been comprehensively updated to highlight key issues for companies in negotiating bank loan documentation.

Responding to evolving market practice, the new Guide, also addresses post-crisis regulatory and economic developments where market consensus is far from settled. Slaughter and May and the Association of Corporate Treasurers (ACT) have today published a new edition of the ACT Borrower’s Guide to the Loan Market Association Documentation for Investment Grade Borrowers. The Loan Market Association (LMA) Investment Grade Agreement is a benchmark in the UK and international loan markets for the documentation of syndicated loans to investment grade credits. Banks and borrowers use or refer to it on a wide range of transactions. The Guide is written as a reference tool for borrowers as they plan to borrow and navigate the terms of the Investment Grade Agreement. The Guide is a key source for comparisons where a large company uses its own standard documentation or a smaller company is considering a bank produced draft that the bank no doubt says represents ‘current market practice’. The Guide is tailored for use by treasurers rather than lawyers – though is found on the desks of many lawyers. It gives a general overview for readers unfamiliar with LMA documentation, and clause by clause commentary, highlighting key points for borrowers to address. It is especially important where the LMA’s document includes alternatives or has blank square brackets ([ ]) indicating that something is to be negotiated – and not overlooked. It highlights matters borrowers may want added too. Stephen Powell and Kathrine Meloni of Slaughter and May produced the Guide. The ACT is grateful to them and to Slaughter and May for their work and enthusiasm. The new edition contains substantial new material. It addresses the current text of the Investment Grade Agreement. It also describes and comments on the implications of certain newer areas of law and regulation not yet reflected fully in the LMA template where market practice is less clear, including the implications of Basel III, regulatory changes affecting derivatives and reforms to LIBOR and other benchmarks. The sheer number of recent and ongoing developments was a key driver for the timing of the new edition. Colin Tyler, Chief Executive of the ACT said

 We are delighted to have worked with Slaughter and May to provide this valuable advice. ACT members are well aware that while pricing of loans is important the first priority is to get the most appropriate terms and conditions. This Guide will help borrowers to spot and negotiate the crucial clauses. 

The ACT Borrower’s Guide to the LMA Investment Grade Agreement is available for download from the ACT website (www.treasurers.org/loandocumentation) or via the Slaughter and May website (www.slaughterandmay.com). A range of other material for companies contemplating negotiating loan documents is also available on the ACT website. ---------- Ends ---------------- NOTES TO EDITORS

1. The last edition of the ACT Guide was published in 2010.
2. Between editions, additional notes are occasionally published by Slaughter and May and the ACT and made available on their websites to respond to developments.
3. Stephen Powell of Slaughter and May, explaining the background to the new edition, commented: "Over the past few years, lenders, borrowers and their advisers have had to grapple with crisis-driven regulatory changes, challenging market conditions exacerbated by the difficulties in the Eurozone plus a number of other developments such as benchmark reform and the US Foreign Account Tax Compliance Act. Generally speaking, the terms on which loan finance is available to many investment grade borrowers have improved in recent months but the process of assessing and determining how to manage the consequences of the events of the past few years remains ongoing. The new edition of the Guide contains detailed information for treasurers on how to negotiate in the current climate."
4. The Loan Market Association’s membership comprises commercial and investment banks, institutional investors, law firms, service providers and rating agencies. The LMA seeks to promote sound, widely accepted market practice to improve liquidity, efficiency and transparency in the primary and secondary syndicated loan markets in Europe, the Middle East and Africa (EMEA). More information is available at http://www.lma.eu.com. The ACT has worked with the Loan Market Association (LMA), on the development of the Investment Grade Agreement (and its revisions) since the project was first launched in 1996. The work of the LMA in producing models and comment is important and valuable to the community as a whole. The ACT Guide, produced by Slaughter and May and provides detailed negotiating advice for treasurers.
5. Slaughter and May, the well known law firm, is a partnership constituted under the laws of England and is authorised and regulated by the Solicitors Regulation Authority.

For further information, please contact: ACT John Grout, Policy and Technical Director T: +44 (0)20 7847 2575 E: jgrout@treasurers.org Martin O’Donovan, Deputy Policy and Technical Director T: +44 (0)20 7847 2577 E: modonovan@treasurers.org Slaughter and May Stephen Powell, Partner Kathrine Meloni, Special Adviser – Financing Stream T: +44 (0)20 7600 1200 E: Kathrine.Meloni@SlaughterandMay.com