The Loans Syndications and Trading Association has published procedures for credit agreement modifications to establish market standards for syndicated credit agreements, just as a flurry of activity in this area occupies the market. "The procedures are designed to guide the market and are not legally binding, but the market can have a standard to follow," explained Jane Summers, general counsel for the LSTA. The plan is to give the procedures a couple of months and then revisit in the first quarter of 2002.
The idea was first proposed in January, when the institutional investor committee was formed. This was the first item on the agenda the buyside wanted to tackle, Summers noted, as even a year ago, firms realized the market was in a downturn. Now there is a flurry of activity, reflecting the economic environment. The procedures include a minimum of five business days for lenders to grant approval following a conference call, except in exceptional circumstances. This is so lenders have adequate time to assess the modification, Summers explained. It has also been suggested that lenders are entitled to a list of other lenders and their exposure levels during the pendancy of a vote. Additionally, any lender may request the agent schedule a borrower conference call if one has not otherwise been scheduled.
Summers said, "The procedures represent a balancing of the interests and concerns of arrangers, investors and borrowers. It is about compromise."