The last word: Liaising and lobbying

 

Q

Describe the main activities of the LMA?

The LMA has three core activities; providing template documentation for use in the syndicated loan markets, education and training in all aspects of the market, and monitoring and discussing regulation and legislation with the appropriate authorities to ensure it does not adversely impact liquidity in the syndicated loan markets.

 

Q

 Tell us about your membership, who are they and why have they joined the organisation?

Our membership comprises four main constituencies: banks; non-bank lenders; law firms; and service providers in the syndicated loan markets. Their reasons for joining will no doubt vary, but the main ones are: access to our documentation – clearly a key factor for law firms; attending our training events and conferences, the majority of which are free of charge to our members; and having a forum for discussion of issues affecting the loan market, especially regulation.

 

Q

 Over 40 of your 576 members are non-bank lenders. As an organisation with deep roots in the bank markets, have you had to adjust to meet the needs of different types of lenders?

We have always been of the view that we have to adapt to the market.  As the lender landscape has evolved so has our focus on meeting the needs of different participants.   If we take leveraged finance for example, we adapted documentation to bring in non-bank institutional investors and encouraged funds lending into the sector to become active members of the LMA. There has been institutional investor representation at LMA board level for several years now and the involvement of funds on various LMA committees and working groups has been key.

 

Q

 Non-bank lenders now hold a market share of around 50 percent within the leveraged finance market. What has this shift meant for the market?

The growth of the institutional investor base in leveraged finance has had a significant impact on primary structures, syndicate composition and secondary market activity. Facility structures are often tailored to accommodate institutional appetite both at senior and subordinated levels, potentially allowing for leverage multiples beyond those available from a senior only transaction.  Syndicates for larger deals, including those sold on a cross-border basis, may exceed several hundred individual funds, making agency a considerably more complex proposition in some cases.   Secondary market volumes are dominated by leveraged finance, largely driven by trading into and from institutional accounts.

 

Q

 Lobbying and representing the industry is very important part of what the LMA does. What are the most urgent issues facing the loan market in 2015? And what is the LMA doing to tackle them?

At the moment we are focusing on the Base Erosion and Profit Sharing (BEPS) proposals being discussed by the OECD, which in their current form could have an adverse effect on many non-bank lenders. We have already sent our comments in to the OECD and will continue to monitor developments. We are also looking at the UK’s proposed withholding tax exemption for private placements and will be sending our comments in to the Treasury and HMRC shortly. Another issue on which we have done a lot of work and continue to talk to the European Parliament and the European Banking Authority are the proposals regarding risk retention vis à vis CLOs.

 

Q

 Secondary market trading in the loan market has been dogged by issues such as delayed settlement times. What is the LMA doing to assess and address the problems?

Secondary settlement issues are the focus of a dedicated working group within the LMA Loans Operations Committee.  The group has been tasked with identifying roadblocks, communicating issues and promoting best practice solutions.  Maintaining the spotlight on secondary settlement and operations in general is a core strategic aim for the LMA into 2015 and beyond.     n