The Loan Market Association has issued a leveraged loan primary document for use in the leveraged loan market in Europe. The LMA hopes this will follow the success of the Recommended Forms of Primary Document, which it launched in 1999 for the investment grade market. That document has become the market standard.
The situation in the leveraged loan market is somewhat different, in part because of the investor base and in part because of its immaturity. Tim Ritchie, head of global loans at Barclays Capital and chairman of the Loan Market Association, says: “The leveraged loan market in Europe still relatively young. In some parts of continental Europe, in particular, it’s very young. [The new leveraged loan primary document] is an opportunity to help in that development and to avoid different approaches to the vernacular.”
Given the different nature of the types of loans and jurisdictions from which they emanate, the document runs to some 200-odd pages. In effect it is a template giving a range of options, which the user can pick and choose whether or not to include, depending on the circumstance.
A more standardised documentation process may aid the fledgling secondary trading market that is emerging in leveraged loan paper. Ritchie says: “From a secondary perspective anything that reduces the amount of paper you have to pour over and zero in on pieces that make that particular transaction what it is makes it much easier for people to buy and sell.”
The Loan Market Association represents some 200 members in the UK, continental Europe and Middle East.