LMA launches combined par/distressed trading documents26 January 2010
The European secondary loan market has undergone significant changes over the past two years particularly with reference to the post-Lehman Brothers environment and a marked increase in price volatility. In light of the changes, the LMA initiated a project seeking to minimise the documentation related basis risk faced by institutions; dealing with a lender/investor becoming insolvent; and addressing documentation matters that commonly attracted debate.
The decision was taken to combine the LMA par and distressed trading documents and create a standard set of documents with only a few key variations reflecting the nature of the different markets. The new Standard LMA Terms and Conditions were formally launched on 25 January, 2010, along with all the related revised documents. Prior to then, the market was given access to the draft revised documents over a two month period to enable participants to become familiar with them.
Clare Dawson, LMA Managing Director, said:
"Given the widespread concern about lenders or investors becoming insolvent post Lehmans and the other market issues thrown up by the disturbance in the financial markets, we consider this move to a combined set of documents, incorporating termination on insolvency of a lender, to be an important step in enhancing overall market liquidity, which continues to be one of the LMA's prime goals. The changes have been well received by the market and we will, of course, monitor their usage over the coming months."