November 13, 2018 - On November 8th, the LSTA hosted a webinar on “Antitrust Issues in Syndicated Loan Transactions” presented by Olivier Antoine, Scott Lessne, and Dan Zelenko of Crowell & Moring. Although syndicated loan arrangements undoubtedly foster efficiencies for both borrowers and lenders and competition by increasing the overall availability of credit and by spreading risk amongst a group of lenders, the potential exists for the creation of anti-competition agreements and for the impermissible sharing of information at critical points in the syndication process. With increased scrutiny over syndicated loans in Europe and the market awaiting next month’s release of the EC’s report on EU loan syndication and its impact on competition in credit markets, it is wise for market participants to reflect on their current syndication practices and ensure they raise no anti-competitive issues. For any syndicated loan, the pro-competitive effects – the creation of a new product, the reduction in price for the borrower, the efficiencies that the parties could not achieve on their own, and the increase in the overall availability of credit – must be weighed against any restrictions. Historically, because US syndication practices have created more competition and more bids, there has not been as much competitive scrutiny as in other areas of business. Although some of the most common examples of illegal activity are obvious (eg, price fixing, bid rigging, coordination of capacity, and allocation of customers) some other behavior may not be so clear. Thus, lenders should carefully review what action is expressly permitted by the RFP and any confidentiality agreements and should adhere to a few basic rules such as not discussing the nature and size of the lender group, avoiding alliances and boycotts, and not promising another bank tranches in the syndication process in exchange for dropping out of the origination. With potential penalties including hefty fines or even prison sentence, lenders are wise to follow the golden rule that they should only coordinate with each other if the borrower consents.
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