The Loan Syndications and Trading Association last week released two new "second generation" guidelines to refine the standard assignment documentation it set forth last year. One important change is a provision that now states that an agent must consent to transfers of revolving loans to anyone other than a lender already in the revolver. In addition, there has been a change to "first generation" documentation, which said if a borrower did not consent to a trade within five business days then he would be deemed to have consented.
Jane Summers, general counsel for the LSTA, said the refinements have been made to further advance liquidity in the market. "Having a standard promotes liquidity so as [new provisions] are accepted and used in new deals, we will see a real improvement. We believe with technical refinements we're going to move more quickly toward a very high degree of market acceptance," said Summers.
The change regarding lender affiliation is designed to preserve equality in the lending group, so that no lender can circumvent the credit agreement through the sale of debt to an affiliate fund without the consent of the lending group. Regarding the second refinement, Summers explained that after monitoring the five-day waiting period for borrower consent on par credits, which originally was made to speed up the process, the LSTA found that the measure was slowing some trades down. When borrowers gave consent before the five days elapsed, the parties still had to wait until the period passed before they could settle the trade.