Butterworths Journal of International Banking & Financial Law (JIBFL)

In this article, the authors consider the relevance of the Loan Market Association’s (LMA’s) defaulting lender concept in non-traditional facilities such as those arranged by private credit funds and non-bank lenders.

Loan agreements traditionally focused on monitoring the creditworthiness of a borrower and the consequences of a borrower’s default but did not often contemplate the failure of lenders or other finance parties. However, in 2009, the LMA revised its documentation to address some of the difficulties that lenders and borrowers encountered in the syndicated loan market in response to the bank failures and wider market turmoil encountered following the global financial crisis in late 2008.

The changes introduced by the LMA focused on four main areas: (i) lender default; (ii) the effects of a facility agent becoming subject to distress; (iii) protection for banks issuing letters of credit; and (iv) the mechanics of dealing with market disruption in the interbank funding market. This article will focus primarily on the changes concerning lender defaults and consider whether those provisions remain suitable in the rapidly changing European loan market.

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This article first appeared in the March 2023 edition of Butterworths Journal of International Banking & Financial Law (JIBFL).