Alerts Archive

Anti-trust amendments to Mandate Letters and Confi and Front Running Letter for Primary Syndication

Recent changes to the UK competition law regime have established that conduct such as price-fixing, bid-rigging or market sharing between competing arrangers and potential lenders will give rise to individual criminal liability, even in the absence of any dishonesty on the part of those involved (the "cartel offence"). We understand that there are concerns that there may be instances in which there is some reasonable uncertainty as to the permissible boundaries of competitive interaction between arrangers and potential lenders in the context of the arrangement of a syndicated lending transaction. 

There is a defence to the cartel offence if the borrower is made aware of the relevant agreement between the arrangers and potential lenders and if no attempt is made to conceal the agreement from the borrower at all times before entering into the agreement. An important way to establish that this is the case is to obtain and document the borrower's prior awareness and authorisation of legitimate competitive interaction between the arrangers and potential lenders. We understand that the point is likely to be most germane at the earliest stage of arranging a syndicated lending transaction (such as the initial contact and agreements between a potential arranger and a borrower client) for which the LMA does not publish recommended documentation. Accordingly market participants wishing to use this protection should consider including appropriate language in any documentation which they enter into at that stage of the transaction.

However, the point is also relevant for the LMA Confidentiality and Front Running Letter for Primary Syndication and the LMA Mandate Letters (both Underwritten and Best Efforts). Accordingly these documents have been updated to make clear on their face that the appointed arrangers will need to interact with potential lenders and to provide evidence of the borrower's recognition and authorisation of such activity.