Private equity market slates LMA form for pro-bank bias

The Loan Market Association (LMA) has put its leveraged finance standard form out for review amid criticism that it is too biased towards lenders.

Controversially, the LMA did not formally canvass views from the private equity community before it published the standard document last year.

A number of leveraged finance lawyers claim that the take-up of the LMA document has been patchy and has been better received in the mid-market, where the senior lenders’ position is stronger than on the upper-end deals. One partner said: “The LMA document is very pro-bank and the market is moving pro-sponsor.”

Clifford Chance global banking head Mark Campbell, who advised the LMA on the document last year, said: “At the lower end of the market some banks would say that the document isn’t bank-friendly enough, so we have to tread a path between the two [sides]. But we’ll clearly be taking account of changes in the market.”

The Lawyer understands that the British Venture Capital Association has now been invited back to review the leveraged document, having been consulted only marginally last year.

A source close to the process said: “We’ve been told we have to bring it up to date. There’s a lot of extra stuff in there that’s quite onerous from the borrower side.”

By contrast, the investment grade document, which was published in October 1999, was heavily negotiated with corporate borrowers, represented by the Association of Corporate Treasurers, advised by Slaughter and May partner Andrew Balfour.

LMA executive director Clare Dawson said: “With all our documentation we review it from time to time to see if it’s up to date. It’s obvious that [sponsors] are going to have their own positions on documentation. It takes time for the market to accept it.”