1. Types of loan facilities and the LMA
Amy Connell
iSeminars

2. Types of loan facilities and the LMA
Types of facilities
Committed and uncommitted
Revolving and term
Single currency and multi-currency
Letters of credit
Swinglines
Evergreen and extendible facilities
Loan Market Association
What is it?
What are its aims?
What does it produce?

3. Committed and uncommitted facilities
Committed. Lender is obliged to lend for agreed period at borrower's request, provided conditions precedent are satisfied. It will be repaid at final maturity, or earlier if an event of default.
Uncommitted. Lender has discretion to lend and can call for repayment on demand. Uncommon in loan markets.

4. Revolving credit and term loan facilities
Revolving credit facilities. Borrower can borrow, repay and re-borrow during commitment period up to a specified maximum amount.
Term loan facilities. Loan for a specified term where repayment is made in accordance with a schedule. Prepayments cannot be re-borrowed.

5. Differences between revolving credit and term loan facilities
Availability
Repayment
Prepayments
Fees
Conditions precedent
Maturities
Table available from this webcast

6. Single and multi-currency facilities
Single currency. Facility available for drawing in one currency only.
Multi-currency. Facility calculated by reference to a base currency, but available for drawing in other approved currencies.
Revolving credit facilities: different loans can be drawn in different currencies.
Term loan facilities: currency can switch at end of each interest period. Calculation always by reference to base currency. Balancing payment may be necessary.

7. Letter of credit facilities
Lender issues letters of credit, guarantees or similar at borrower's request up to a specified maximum amount.
Borrower provides a counter-indemnity to lender.
Lender's liability is reduced by cancellation or expiry of letter of credit or by provision of cash cover by borrower.
Can be fronted or syndicated.

8. Structure of a letter of credit facility
Bank(s)
LC facility LC
Counter-indemnity
Borrower
Beneficiary
Debt facility or like

9. Swingline facilities
Short term (7/10 day) standby facility providing backstop support to a CP programme
US dollars or euro
Available on day of request
US$ swinglines: interest calculated by reference to higher of prime rate and Federal Funds plus a percentage rate per annum
Euro swinglines: interest charged at reference rate supplied by Reference Banks as overnight rate for Euro deposits, or EONIA
Sub-limit within a revolving credit facility

10. Other variations Evergreen and extendible facilities
364 day facilities
Term out options
Tranches can be of different types – e.g. two revolving credit tranches with a letter of credit option and a term loan in the same facility agreement

11. What is the LMA?
Trade association of banks which participate in the syndicated loans market
Sister associations
Loans Syndications and Trading Association of New York (LSTA)
Asia Pacific Loan Market Association (APLMA)
British Bankers' Association: retail and bilateral loans

12. What are the LMA’s aims?
To promote a more structured and liquid loan market
Standardise and simplify sale of loan assets
Establish a market for settlement procedures
Establish codes of practice for market activity
Establish a loan valuation mechanism
Standardisation of trading documentation, primary documentation and practices. Improves liquidity, benefiting banks and borrowers

13. LMA documentation
Available to members on the LMA website (
Primary and secondary documentation
Credit agreements are mainly suitable for investment grade, English-incorporated borrowers borrowing unsecured (but with guarantors)

14. LMA primary documentation
Standard credit agreements (primary agreements) with options
Term only, revolver only or term and revolver, with swingline and letter of credit options
Single currency and multicurrency versions
Leveraged credit agreement
French law credit agreement and guide to Islamic finance
User guides for many LMA agreements
Agency practices paper
Term sheets: investment grade and leveraged
Mandate letters: underwritten and best efforts
Confidentiality letter
Mandatory costs recommendation
Grey market guidelines

15. LMA credit agreements Plain English style
Standardisation of language for mechanical and non-controversial clauses
Variable language for others: reps and warranties, covenants, events of default and transfer
LMA credit agreement approved by BBA and ACT
A&O "standard" credit agreements are LMA-compliant. Any variations tend to be lender-friendly

16. Secondary market documentation
Wide range of secondary market documents:
Secondary debt trading documentation: par and distressed debt versions
User guides: par and distressed debt versions

17. These are presentation slides only
These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources.
Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP's affiliated undertakings.