Dollar, Euro notes
The Loan Market Association (LMA) has announced the introduction of two new documents that focuses on growing international markets titled -Single Currency Term Facility Agreement intended for use in developing market jurisdictions and Single Currency Term Facility Agreement intended for use in pre-export finance transactions (PXF).
The documents are designed for syndicated loan transactions- that is, a loan where two or more institutions contract to provide credit to a particular corporate or group.
Such a facility tends to be more suited to medium to large borrowers, with borrowing requirements in excess of £50 million.
A statement from the LMA, which is the trade body for the syndicated loan markets in Europe, the Middle East and Africa (EMEA), explained that both documents were created in response to demand from market participants who felt there was increased need for LMA-style recommended documentation in these markets.
According to the association, the developing markets facility agreement, which uses the same basic structure and "boilerplate" as existing LMA facility agreements, was produced with input from an experienced working party, consisting of representatives from international banks (including in-house lawyers) and major international law firms.
The LMA, which currently has 490 organisations as members and covers 46 nationalities added: “The document assumes that the transaction is an unsecured single currency term loan to obligor companies incorporated in one or more developing market jurisdictions and although it is envisaged that the transaction will be governed by English law, no particular jurisdiction of incorporation is assumed with regards to the obligors themselves.
“Therefore, whilst the document contains provisions applicable to developing markets generally, users must also consider any relevant legal or other issues arising in the jurisdiction in which the obligors are incorporated.
“The developing markets facility agreement presents the draftsman with a large range of optional provisions, including numerous footnotes, intended either to draw attention to provisions that may be particularly sensitive to jurisdiction-specific concerns or to set out suggested wording that may be used as a starting point for provisions that have been left blank.”
Commenting on how the PXF was developed, the London-based LMA revealed that the document was created using experienced market practitioners.
“The document assumes a traditional pre-export finance structure whereby a term loan facility is made available to a borrower who is the seller of specified products to specified buyers under sales contracts, with security taken over those sales contracts, associated letters of credit and certain bank accounts into which payments under the sales contracts are made or swept.”
Managing Director, LMA, Clare Dawson, also explained that the documents were produced to meet market demand and with the aim of improving liquidity within the syndicated loan markets.
“It is hoped that LMA recommended form documents, with their common language and framework, will lead to increased efficiencies within these increasingly important areas of the syndicated loan market," he added.
On his part, Ecobank’s Group Head of Regional Business and Commodity Trade Finance, René Awambeng, described the introduction of the documents as a move towards standardisation of documentation to facilitate activity within the international syndicated loan markets.