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The LMA publishes a recommended Timeline for Settlement of Primary Syndication Incorporating Delayed Settlement Compensation

30 January 2018

The LMA has launched the publication of a recommended Timeline for Settlement of Primary Syndication Incorporating Delayed Settlement Compensation, intended to be part of the LMA's efforts to reduce settlement times for primary syndications.

The LMA has worked with a committee of LMA members actively involved as Investors and Underwriters in the primary loan markets to produce the Primary Timeline, which seeks to address the delays that occur in primary syndications in the following ways:


  • by providing a standard set of recommended timings and an alternative fast- track set of recommended timings for each of the various activities in the syndication process; and
  • by incorporating a requirement, in certain specified circumstances, for the Underwriters to pay delayed settlement compensation (i.e. margin and/or recurring fees paid under the facility agreement) to the Investors if settlement of primary syndication has not occurred within the recommended timeframe set out in the standard or, as the case may be, fast track timetable.

Balancing the competing interests of all stakeholders in the syndication process, the Primary Timeline acknowledges that Underwriters remain "on risk" and continue to have the legal obligations and be subject to the regulatory and accounting treatment of a lender of record until their commitment/participation has been transferred to an Investor in accordance with the terms of the facility agreement. In addition, the Primary Timeline recognises that the Investors have agreed to participate in the facility in the amount notified to them on the Allocation Date.

Intended as a statement of recommended best practice both in relation to achieving settlement of primary syndication within a reasonable timeframe and the payment of delayed settlement compensation, the Primary Timeline is not legally binding. The LMA have made the Primary Timeline applicable to primary syndications in respect of both leveraged and investment grade transactions, and provide for both a standard (27 Business Days) and a fast-track timeline (14 Business Days). Both timelines run from the date on which all potential lenders are notified of their allocations. If the parties to a syndication have agreed to adhere to the recommendations in the Primary Timeline, the standard timeline will apply unless satisfactory Administrative Details Forms have been returned to the Agent and all "know your customer" checks have been completed by the Investor, the Agent, and the Arrangers/Bookrunners within 4 Business Days of the Allocation Date, in which case the fast-track timeline will apply.

If settlement of primary syndication has not occurred within the specified time, the LMA's Primary Timeline provides that delayed settlement compensation (meaning margin and recurring fees paid under the facility agreement) will be payable to the Investor on the Transfer Date by the Underwriter. This is only if the Underwriter is a sole Underwriter or a Fronting Underwriter, and is the same legal entity or within the same group as the Agent. In such case, the Underwriter is only required to pass through the margin and recurring fees on the Transfer Date to an Investor in respect of that Investor's allocation if the Underwriter is in receipt of those amounts from the Obligor, the Investor has signed the Transfer Certificate and the Investor funds its allocation on the agreed date. Delayed settlement compensation is payable for the relevant delay period.

Delayed settlement compensation is an important feature of the Primary Timeline. However, the Primary Timeline recognises that there needs to be flexibility for legitimate delays in the syndication process and so expressly provides for the standard timeline (but not the fast-track) to be reset in such circumstances. In addition, the Primary Timeline acknowledges that the parties to a syndication may agree to extend the trigger date for delayed settlement compensation by up to 14 Business Days when extra time is required to effect transfers to Investors particularly when they are unable to accept a transfer until after funding.

The LMA intends to keep the Primary Timeline under review to ensure it continues to reflect best practice, promotes greater efficiencies and helps to reduce settlement times within the primary syndication process.

Commenting on the Timeline, Nicholas Voisey, LMA Managing Director, said:

"This has been a challenging but necessary project. Not least of the challenges was gaining recognition and understanding from both investors and arrangers as to when they are on and off risk."

"The Primary Timeline is the result of much discussion with market participants over a significant period of time. Although it is not legally binding and the circumstances in which delayed settlement compensation is payable by Underwriters is limited, it nevertheless establishes a framework within which settlement of primary syndication can reasonably be expected to occur and an acknowledgement that there may be circumstances when it is appropriate for delayed settlement compensation to be payable."