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Press Releases

LMA announces publication of new Schuldschein Loan Agreements and User Guide

31 October 2018

The LMA is pleased to announce the launch of new recommended forms of loan agreements and a user guide for Schuldschein transactions (the "Schuldschein Documentation").

Schuldschein loans have been in existence for many years with predecessors dating back to the end of the 19th century. In recent years, there has been a marked increase in overall volumes and increased interest in the product, both from a domestic German and an international perspective. In late 2014, the LMA published a Schuldschein Guide targeting those less familiar with the product, in particular the international borrower and lender/investor, giving current market perspectives, outlining the legal framework and summarising legal nuances particular to the product, but not providing recommended forms of documentation.

The Schuldschein Documentation project began in late 2017 in response to strong demand from the market to provide a recommended form of Schuldschein loan agreement. The market already uses boilerplate language in Schuldschein loan agreements, however each arranger has to date made use of its own templates, with the result that there is no common approach to provisions. It was thought that achieving a common starting point would promote efficiency and liquidity in the market. From an early stage it was accepted that any document produced would need to be tailored to suit the credit profile and requirements of the borrower and the underlying transaction structure. However, it was considered a major step forward in promoting the efficiency of the market if a document could be produced which provided the draftsman with an agreed starting point. The recommended forms of Schuldschein loan agreement are available in the German and the English language for both single borrower and single borrower / guarantor transaction structures. The related User Guide, which is also available in the German and English language, addresses all material Schuldschein loan related legal issues, including further sample clauses and is unique in the market.

The Schuldschein Documentation was put together by an experienced working party, consisting of representatives from the Verband Deutscher Treasurer (Association of German Treasurers), domestic German and international banks (including in-house lawyers) and major law firms active in the Schuldschein market.

Commenting on the document, Nigel Houghton, Managing Director of the Loan Market Association, said:

"This project has been timely, as an instrument which pre-dates the syndicated loan market by over 100 years looks to new technology to facilitate process change. Recommended templates can only assist in this evolution. We would like to thank the Working Party members for their support for this project, and particularly the engagement of the VDT.

“As international borrowers and investors increasingly adopt the Schuldschein as an instrument of choice, one of the key considerations has been the highly efficient execution. The next logical steps in this development will therefore be further workstream digitalization through the use of electronic platforms, as well as the establishment of market-wide standards in the documentation. I wish to thank all of our colleagues for their involvement and hard work.” (Andreas Petrie, Head of Primary Markets, Landesbank Hessen-Thüringen)

“The recommended forms of Schuldschein loan agreements preserve the essence and basic principles of traditional German Schuldschein documentation, balance the interests of lenders and borrowers and anticipate future documentary requirements, such as screen rate replacement mechanics whilst enhancing the effectiveness of the documentation process, including on debt platforms. I am highly confident that they and the related User Guide will be well received in the market.” (Dr. Neil George Weiand, Partner, Linklaters LLP)

The suite of Schuldschein documents will further promote a well-established financing instrument. It permits borrowers, lenders and arrangers to focus on issues hingeing on the structure of the financing and the borrower´s credit standing instead of spending much time discussing legal technicalities. I am sure that both, debut and frequent Schuldschein borrowers will benefit from the establishment of a documentation standard. (Sebastian Brauer, Head of Corporate Finance & Treasury, Open Grid Europe GmbH)