March 6, 2014

The Loan Market Association (“LMA”) published a revised version (“Revised T&C”) of the LMA Standard Terms and Conditions for Par and Distressed Trade Transactions (Bank Debt/Claims) as part of its “Plainer English” project. These Revised T&C went live this past Monday, March 3, 2014 (“Effective Date”). All LMA trades entered into prior to the Effective Date will be on the basis of the former LMA Terms and Conditions (in effect from 2012), and all trades entered into on or after the Effective Date will be on the basis of the Revised T&C.

While Revised T&C may require some changes in how market participants negotiate and draft trading documents, most are minor in scope and significance while others simply serve to clarify the existing market practices.

Some of the examples of these changes are as follows:

• Obligations under the credit documents travel together with rights to the credit assets purchased.
• Delayed settlement compensation payable by Seller after payment default is due irrespective of whether or not the Obligor is in payment default. Seller has the right to demand repayment by the Buyer if the Obligor defaults and does not pay the scheduled payment within any applicable grace period, and it is up to the Seller to demand repayment from the Buyer.
• Transfer costs are to be split between multiple entities managed by the same investment manager so that each party, unless otherwise agreed, only pays one half of one transfer fee in total.
• Unless otherwise specified in the trade confirmation, the seller and the buyer act as principals so that it is no longer necessary to indicate in the trade confirmation whether a party is acting as a principal or an agent.
• A bankruptcy or insolvency proceeding against a buyer or seller that is required by law or regulation to not be publicly disclosed does not constitute an insolvency event and does not result in termination of the trade.
• English choice of forum is accepted by the seller and the buyer and neither will argue to the contrary.
• Documents may be signed electronically. Originals of documents are only required to be delivered upon request.

Various other LMA secondary trading form documents, such as the Bank Debt Trade Confirmation, Participation Agreements and User Guide have been similarly amended.

Frenkel Sukhman LLP has been assisting its fund and other clients with documenting and negotiating bank debt and claims trading documents in par and distressed debt transactions and would be pleased to assist you with your debt or claims trading transactions if you are in need of legal counsel.