LSTA's New Model Credit Agreement Provisions Go Live | Practical Law

LSTA's New Model Credit Agreement Provisions Go Live | Practical Law

An update on the LSTA's final revised Model Credit Agreement Provisions.

LSTA's New Model Credit Agreement Provisions Go Live

Practical Law Legal Update 7-505-4268 (Approx. 3 pages)

LSTA's New Model Credit Agreement Provisions Go Live

by PLC Finance
Published on 25 Mar 2011 • USA (National/Federal)
An update on the LSTA's final revised Model Credit Agreement Provisions.
On March 25, 2011, the LSTA published its final version of the revised Model Credit Agreement Provisions (MCAPs) for all provisions other than tax. The most significant change to the non-tax provisions of the MCAPs is the addition of new defaulting lender provisions. These provisions were developed in response to lenders' concerns about the risks of other lenders in the syndicate defaulting on their loan obligations, which increased as a result of the 2008 Lehman bankruptcy filing. The new defaulting lender provisions provide that:
  • Defaulting lenders are defined as any lender that:
    • fails to fund a portion of its loans within two days;
    • notifies the agent, or makes a public statement, that it does not intend to comply with its loan funding obligations (or fails to confirm that it will comply); or
    • becomes, or has a parent company that becomes, the subject of a bankruptcy proceeding.
  • Other than for certain key matters, a defaulting lender's vote will be disregarded for any required lender vote.
  • Borrowers may rely on yank-a-bank provisions to replace a defaulting lender.
Changes were also made to the following sections of the original May 2005 version of the MCAPs:
  • Definitions (including adding the Dodd-Frank Act and Basel III to the "Change in Law" definition).
  • Yield Protection.
  • Mitigation Obligations; Replacement of Lenders.
  • Right of Setoff.
  • Sharing of Payments by Lenders.
  • Administrative Agent's Clawback.
  • Agency.
  • Notices; Effectiveness; Electronic Communication.
  • Expenses; Indemnity; Damage Waiver.
  • Successors and Assigns.
  • Governing Law; Jurisdiction; Etc.
  • Counterparts; Integration; Effectiveness; Electronic Execution.
  • Treatment of Certain Information; Confidentiality.
  • Resignation of Issuing Bank.
  • Resignation of Swingline Lender.
  • Exhibit: Assignment and Assumption.
PLC Finance's resources have been updated to reflect these revised non-tax clauses (see Legal Update, PLC Resources Updated for LSTA's New Model Credit Agreement Provisions). The new MCAPs can be found on the LSTA website.