Introduction to the LMA: Structure, Objectives and Core ...data.cbonds.info/publication/LMA.pdf ·...
Transcript of Introduction to the LMA: Structure, Objectives and Core ...data.cbonds.info/publication/LMA.pdf ·...
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Introduction to the LMA: Structure,
Objectives and Core Activities
Presentation to the Association of Regional
Banks of Russia
Nicholas Voisey – LMA
27 September 2011
Moscow
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LMA Background
• Established in 1996 by 7 leading banks
• Located in London
• Currently 9 staff (including Executive)
• 20 board members (excluding LSTA and APLMA)
• Operate via a series of committees and working parties
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Full Members Associate Members
LMA Structure
LMA Board
LMA Executive
Working Parties
Committees
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LMA Structure (cont’d)
• LMA Board – Full members only
– Bank and non-bank
– LSTA and APLMA representation
• LMA Executive – Managing Director – Clare Dawson
– Directors – Nicholas Voisey and Mike Johnstone
• LMA Membership – Full members (Banks and Non-Bank Investors)
– Associate members (primarily Law Firms)
– Courtesy members (e.g. Bank of England, BBA)
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46 nationalities
476 organisations
59 new members this year
LMA Membership: 2011
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MEMBERSHIP BREAKDOWN
476
Members 18 126 42
290
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Principal benefits to be gained by LMA members
• Access to documentation library
• Opportunity to influence outcome of LMA projects
• Updates on market developments
• Addressing market issues as a group
• Access to specific training events/general education programme
• Reduced costs to individual members by virtue of a collective approach to issues
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LMA Objectives
• Four Overarching Objectives:-
• Foster market liquidity
• Promote the syndicated loan market in its broadest sense
• Act as an agent for constructive change
• Educate and inform all market participants
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LMA Core Activities
• Provision of recommended documentation for both primary and secondary syndicated loan markets
• Establishing Market Practice and Guidelines
• Monitoring regulation, legislation and other factors affecting the market
• Lobbying on key issues
• Education/training throughout EMEA
• Publishing updates, newsletters and other literature on important market issues
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LMA Committees and Working Parties
• Committees are made up of active market practitioners and lawyers who are specialists in the relevant field. Committees include:
– Documentation
– Secondary Documentation
– Agency
– Loan Operations
– Tax
• In addition, the Board and Committees establish Working Parties to address specific issues and projects. Some of these include:
– Primary Syndication Issues ─ Basel III
– Rating agency ─ Real Estate
– Institutional Investor ─ Trade Finance
– Widening Investor Base ─ Restructuring/Insolvency
– Leveraged and Intercreditor
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LMA Documentation
• Objectives
– LMA documentation provides a common basis for
documentation between lender and borrower
– Increases efficiency and avoids negotiation of boilerplate terms
– Commercial aspects left open for negotiation
– Embodies a standardised deal structure (with options) – therefore needs to be adapted for deal specifics
– Possible alternatives may be offered where market has not reached consensus
– Consistency of drafting and terminology across whole suite of documents
– Reflects legal, regulatory and market practice changes from time to time
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LMA Documentation
• Standard form documentation suites
– Investment Grade Primary Documents (6)
– Leveraged Finance Facility Agreement (1)
– Secondary Trading Documents
– Intercreditor Agreement
– French and German law Primary Documents
– Ancillary documents – term sheet, mandate letters, release and reliance letters, co-ordinating committee letters, confidentiality undertakings, non-public information papers etc
– The LMA will be researching the possibility of extending its documentation beyond the existing general finance concept to more specific debt sectors – currently real estate and commodity finance
• Establishing Market Practice and Guidelines
– User Guide for Secondary Trading Documentation
– Guidelines on "Transparency and the use of information"
– Checklist of pre/post trade issues
– Glossary of terms for Syndicated Loans
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LMA Documentation – Creating a standard document
• Formation of Working Party
– Invitation to active market participants (banks; non-bank investors and including lawyers)
– Member of LMA Executive to co-ordinate process
• First draft produced by appointed law firm
• First draft reviewed by Working Party
• Ongoing meetings and drafts produced until document finalised
• Potential review/contribution from other relevant parties such as:
– ACT (e.g. Investment Grade Document)
– Mezzanine community (e.g. Leveraged Document and Intercreditor)
• Document launched to the market
• Ongoing review process carried out by Working Party
• Document updated as required
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LMA Facility Agreements
Investment Grade Facility Agreements: • 6 facility agreements (term/revolving/multi-currency/single currency),
slot-in options, term sheet, mandate letters, syndication agreement, user’s guide
• “hard" and “soft” provisions
Leveraged Facility Agreements: • 1 facility agreement, term sheet and user’s guide
Also assumes:
– Senior and mezzanine acquisition structure
– Ordinary shares and loan note/ preference share
equity structure
• “hard” and “soft” provisions
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Provisions in a Facility Agreement
• Hard Provisions:
– Those provisions which are not dependent on circumstances of a
particular deal and are not expected to be amended e.g. mechanics of making a loan, paying interest, notice provisions, withholding taxes and gross ups, relationship between agents and lenders
• Soft Provisions:
– Clauses which set a starting point for negotiation. There is a
recognition that amendments to the recommended wording are likely on a case by case basis e.g. financial covenants, undertakings, representations, events of default
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LMA Secondary Trading Documents
Trade Confirmation
Transfer Certificate Assignment Agreement Participation Agreement
Terms and Conditions
Ancillary Documents: Confidentiality letters; Notices; Termination Agreements; Netting
Agreements
User’s Guide; Checklist;
Explanatory Memorandums
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LMA Intercreditor Agreement
• LMA Intercreditor Agreement designed for use in conjunction with the Leveraged Facilities Agreement
• Drafting follows same principles as other LMA documents – hard and soft provisions, commercial aspects left open for negotiation
• Document addresses the complex legal issues raised by intercreditor agreements, allowing users of the document to focus on commercial aspects of each actual transaction
• Particular focus on the treatment of Hedge Counterparties
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LMA Documentation Timeline
DATE DOCUMENT LAUNCHED
SEPTEMBER 1997 SECONDARY TRADING DOCUMENTS (PAR/NEAR PAR)
INTRODUCED
MARCH 1999 DISTRESSED DEBT TRADING DOCUMENTS LAUNCHED
NOVEMBER 1999 INVESTMENT GRADE PRIMARY SYNDICATED LOAN
DOCUMENT LAUNCHED
JULY 2002 FRENCH LAW/ENGLISH LANGUAGE PRIMARY DOCUMENT
LAUNCHED
JANUARY 2004 (REVISED JUNE 2009) LEVERAGED LOAN PRIMARY DOCUMENT LAUNCHED
OCTOBER 2005 REVISED DISTRESSED DEBT TRADING DOCUMENTS
LAUNCHED
OCTOBER 2006 FINANCIAL COVENANT DEFINITIONS PUBLISHED
SEPTEMBER 2007 GERMAN LAW PRIMARY DOCUMENT LAUNCHED
SEPTEMBER 2008 CO-ORDINATING COMMITTEE LETTERS LAUNCHED
MARCH 2009 INTERCREDITOR AGREEMENT LAUNCHED
JANUARY 2010 COMBINED PAR/DISTRESSED SECONDARY TRADING
DOCUMENTS LAUNCHED
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EMEA Volumes by Borrower Nationality
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2002 2003 2004 2005 2006 2007 2008 2009 2010 1H 2011
$bn
2002 - 1H 2011
Other
Middle East
Russia
Germany
France
United Kingdom
Source: Dealogic
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Secondary Loan Market Volumes in Europe
?
0
5
10
15
20
25
30
35
40
45
50
Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011
US$bn
European Secondary Loan Volumes 2002 to Q1 2011
Source: Dealogic
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LMA Committees and Working Parties – current issues and initiatives
ISSUE INITIATIVE
ATTRACTING NEW INVESTORS • INSTITUTIONAL INVESTOR W/P
• WIDENING INVESTOR BASE W/P - MARKIT
LEVERAGED INDEX
• PRIMARY DOCUMENTATION ISSUES
AFFECTING SECONDARY LIQUIDITY
RATING AGENCIES METHODOLOGY AND
PROCESSES
• RATING AGENCY W/P - MOODY’S AND
S&P W/Ps – CREDIT ESTIMATES AND
STRUCTURES
AGENCY PRACTICES • AGENCY AND SECURITY AGENCY
COMMITTEE – AGENT ROLE
SETTLEMENT AND OPERATIONS • WORKING WITH VENDORS, LENDERS,
AGENTS AND SERVICE PROVIDERS
PRIMARY SYNDICATION PRACTICES • PRIMARY SYNDICATION W/P – DELAYED
ALLOCATION/SETTLEMENT
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LMA Committees and Working Parties – current issues and initiatives
ISSUE INITIATIVE
INSOLVENCY AND RESTRUCTURING • RESTRUCTURING W/P
- CONSULTATIONS
- PAN-EUROPEAN BEST PRACTICE REGIME
CHANGING ACCOUNTING STANDARDS • REVIEWING ACCOUNTING PRINCIPLES AND
PRACTICES
BASEL III AND REGULATION • BASEL III (LCR; NSFR; CAPITAL AND
LEVERAGE RATIO)
• US LEGISLATION – DODD-FRANK AND FATCA
• CRD – 122a RISK RETENTION
DOCUMENTATION • PRIMARY – REAL ESTATE AND COMMODITY
FINANCE
• PRIMARY – INTERCREDITOR AND
LEVERAGED REVIEW (NEW CAPITAL
STRUCTURES)
• SECONDARY – COMBINED PAR/DISTRESSED
REVISIONS MARCH 2011
• ONGOING REVIEW OF ALL DOCUMENTS
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LMA Education and Training
• The number of events has increased dramatically over recent years
• 3,000 delegates attended LMA events in 2010
• Events range from 1 hour seminars to a 5-day certificate course and include:
– LMA Certificate (5 day) and Lawyer Course (2 day)
– Documentation Training Courses (1 day) – Investment Grade, Leveraged, Secondary and Intercreditor
– Series of seminars and conferences – London, Frankfurt, Paris, Stockholm, Madrid, Istanbul, Moscow, Dubai, Beijing, Johannesburg and Nairobi
– Annual LMA London Conference
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Lobbying Activities - Recent Submissions to Regulators
• Article 122a (Exposures to transferred credit risk) of Directive
2006/48/EC (the "CRD") and Collateralised Loan Obligations ("CLOs")
• Response to the EBA (CEBS) Consultation Paper on Guidelines to Article 122a of the Capital Requirements Directive
• Dodd-Frank Risk Retention Rules
• Comments to IRS and others in relation to the Foreign Account Tax Compliance Act (FATCA)
• Response to the Commodity Futures Trading Commission and Securities and Exchange Commission on the definition of "swaps" under "Dodd-Frank“
• Response to European Commission Consultation in relation to the Review of the Markets in Financial Instruments Directive (MiFID)
• Response to the EU consultation re cross border interest payments
• Response to the EU consultation re cross border interest payments - Issue 4 – extending the Directive to payments between unrelated undertakings
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LMA Publishing
• Monthly updates
• Newsletters every six months
• Activity Updates
• Seminar and Conferences
• Books on the syndicated loan market
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LMA Publishing
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ANY QUESTIONS?
27
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LMA Contact Details
Loan Market Association
10 Upper Bank Street
London
E14 5JJ
Telephone: (+44) (0)207 006 5364
Email: [email protected]
Website: www.lma.eu.com