October 22, 2021 - by Lee Shaiman. We are all delighted to be seeing the start of non-LIBOR loan originations and expect that the pace of those originations will continue to pick up ahead of year-end. This trend is critical to a successful transition, but it will be both new non-LIBOR originations and remediation of legacy loans that will see us to the other side. Given the end of certain panel bank LIBOR currency settings (i.e., euro, sterling, swiss franc and yen) at the end of this year, remediation of loan facilities referencing these LIBOR settings is underway. While loan market participants are keen to see amendments replacing LIBOR executed efficiently, it is important that traditional amendment principles are kept in mind. As set forth in the LSTA’s Standard Amendment Procedures, one of those bedrock principles is affording lenders adequate time to review the amendment before consents are required. This principle applies to any amendment to replace LIBOR, but is particularly important as amendments to replace LIBOR may also include additional unrelated modifications.

Subject to the terms of the relevant credit agreement, the Standard Amendment Procedures recommend a review period of not less than five business days before consents are due:

Section 1(a) provides: “The Administrative Agent shall notify each lender party to the credit agreement (each, a “Lender”) of pending modifications to syndicated credit documentation that require lender consent, and shall furnish each Lender with the proposed form of modification document and related supporting material sufficiently in advance of the deadline for consent established in accordance with paragraph 2 below to afford adequate time for review and comment…”

Section 2 provides: “Lenders should be given a period (the “Approval Period”) of not less than five business days from date of the conference call (or the date of receipt of the form of modification and related materials under item 1(a) above, as applicable) to approve or reject the requested modification, unless exceptional circumstances, which shall be clearly explained in the materials provided to the Lenders, require approval within a shorter time frame.”

The remediation process has only just begun and the volume of amendments to remediate legacy loans will undoubtedly grow as we move into the next phase of the transition process. With that in mind we are taking the opportunity to ensure that all members are aware of the LSTA’s longstanding Standard Amendment Procedures.