Magic circle law firms have drawn up the first-ever standard contract for syndicated loans to speed up negotiations in the billion-pound market.
Clifford Chance, Slaughter and May, Allen & Overy, Freshfields and Linklaters worked together to draw up a standard form that will be recommended by the Loan Market Association to parties involved in syndicated loan talks.
David Morley, head of banking at A&O, says: “The form will speed up the process and cut transaction costs.”
Negotiating a syndicated loan is traditionally complex and time consuming because there are many lenders but just one borrower. This year more than £375bn has been lent by syndicates in Europe.
Mark Campbell, managing partner of Clifford Chance's finance practice, says: “It will have a big impact on the legal market. Most banking transactions in the City would involve a syndicated loan.
“This provides a starting point for every firm or bank. Major banks have supported this and will make sure law firms use it.”
The template allows for the working out of interest rates, repayments, and how to handle changes to laws and taxes.
Campbell says: “No standard document has been tried before. Previously every law firm had its own variation. There will be less messing about looking at how to do them now.
“I don't know why it hasn't been done before but I suppose lawyers had a proprietorial interest in having their own forms.”
He says the workloads of banking lawyers will diminish slightly. But he adds: “I don't think we will go to the poorhouse.”