LMA publishes "Developing Loan Markets" book19 September 2013
The LMA has published its third book, which analyses the role of the syndicated loan product in developing markets.
Given the private nature of the market, there is very limited published material covering the major themes which impact the loan product, particularly in a developing market context, where loans are a key driver for sustainable growth. The LMA has looked to address this omission and it is expected that the book will be of benefit not only to market participants, but also to a wider academic audience, both of whom are looking to understand the workings of this crucial product and the role it plays within some of the world's fastest growing economies.
After a series of economic reviews and loan market commentaries, which centre on key developing market jurisdictions, the book goes on to examine the types of loan product that are offered in the developing markets, such as pre-export finance, trade and supply chain finance, project finance and borrowing base finance. It also outlines the various forms of risk mitigation and lender assistance available to those looking to invest in developing countries, including the role played by products such as political risk insurance, credit derivatives and ratings, as well as organisations such as export credit agencies and multilateral development banks. Finally, the book turns to the importance of documentation, law and governance in developing markets, analysing such issues as the specific role of LMA documents, choice of governing law, dispute resolution and enforcement and the importance of political and corporate governance in investor decision making.
"Developing Loan Markets" will be launched at the LMA's conference today and copies will be available to members at the event.
The book will be sent free to all LMA members and will also be distributed to universities and business schools. It can be purchased by non-LMA members for £50.
Quote from the back-cover of the book:
"The syndicated loan is a proven product in the history of economic development, with many of today's developed nations initially using syndicated loans for their early financing.
Developing markets offer great opportunities as global demographics shift, demand for their resources increases and new technologies evolve, but they are not without risk. An awareness of these risks and an understanding of how to mitigate them by, amongst others, sound lending structures and appropriate documentation, is one of the main objectives of this book.
"Developing Loan Markets" analyses the economic and loan-product dynamics within the various regional developing markets, before moving on to examine the different financing options, risk mitigation tools, lender assistance available and documentation and governance issues to be considered.
Those who understand and learn from the past and the products available in the present, are better positioned to profit in the future. The syndicated loan product is central to achieving that objective."
Clare Dawson, Managing Director - LMA
"Slow growth and low returns have resulted in lenders looking outside established developed economies in a search for new opportunities. This book is reflective of this trend, and looks to provide market participants with an insight into the key issues and challenges which may arise when investing in developing market jurisdictions."
"This book is very much a product of the LMA's current agenda – to expand the Association's remit beyond the purely corporate loan market into a broader spectrum of syndicated loan products. The LMA is also committed to encouraging the growth of the syndicated loan market in developing countries across EMEA, as an important tool to aid investment and development. This book sits alongside a growing library of facility agreements intended for use in developing markets and a series of events which target new and existing lenders working in, or looking to invest in, developing economies."
1. Why has the LMA produced the book?
As already set out in the above press release, the book is not only reflective of the increased interest on the part of investors in developing market opportunities, but also aims to address the lack of detailed published material in relation to the loan product generally. The book is also a product of the LMA's current remit to expand into different areas of the loan market, going beyond its traditional areas of focus. Finally, the book is illustrative of one of the LMA's core objectives: to improve liquidity. It is hoped that this book will assist in this process by enabling investors to understand the product and the specific risks which may arise when lending into developing markets.
The book sits alongside the LMA's other developing market projects – the production of standardised documentation specifically intended for use in developing markets and a series of training events designed for participants in these jurisdictions.
2. Who has contributed to the book?
Each chapter has been written by senior loan market professionals from both the private and public sector (including bankers, lawyers, economists and other key advisors and service providers). These individuals are experts in their chosen fields and work actively in the developing markets.
3. Which developing market jurisdictions are covered in the book?
The regional economic reviews and loan commentaries focus on four key developing market jurisdictions: 1) Central and Eastern Europe (including Russia); 2) North Africa; 3) Sub-Saharan Africa; and 4) Latin America and the Caribbean. The book also contains a separate case study on China, analysing the country from a loan, economic and general market perspective. The remaining chapters of the book look across these key jurisdictions.
4. What are the financial tools discussed in the book?
The book contains a section dedicated to the key specialist financial products used in developing loan markets. These are: pre-export finance; trade and supply chain finance; project finance; and borrowing base finance. Each chapter contains a general introduction to the product (with a view to providing non-specialists with a basic understanding of the technical mechanics); a brief history of the product in a developing market context; and the key legal and commercial issues to be considered when offering the product in a developing market. Finally, each chapter explains how the global financial crisis has impacted the product; how it is likely to evolve both short and long term; and any other relevant challenges.
5. What are the risk issues particular to developing markets?
The book looks at some of the key risks that arise when lending into developing markets, and the products and other forms of assistance available to lenders to mitigate such risks. Accordingly, the book contains chapters on the use of products such as political risk insurance, ratings and credit derivatives, and also focuses on the role of key organisations, including export credit agencies and multilateral development banks.
6. What are the legal and governance issues particular to developing markets?
The book contains several chapters focused on law, documentation and governance. For example, it includes an overview of the LMA's facility agreements for use in developing market transactions; a chapter on the benefits of using English law in cross-border developing market transactions; a chapter which looks specifically on enforcement and dispute resolution in these economies, and a detailed analysis of the importance of governance on investor decision making (whether in a political, economic or corporate context).