LSTA Announces Publication of Revised Trading Documentation as Primary Delayed Compensation Protocol Goes Into Effect

On March 16, the Loan Syndications & Trading Association (LSTA) published revised trading documentation in connection with the new Primary Delayed Compensation Protocol (the Protocol).

The objective of both the Protocol and the revised trading documentation is to provide lenders that are part of a primary syndication of new money facilities with the ability to receive the benefit of Delayed Compensation for primary trades that do not settle quickly.  As set forth by the LSTA, the purpose of the Protocol is to (i) increase liquidity, (ii) produce faster settlement times for both primary and secondary trades, and (iii) comply with the mission of the LSTA to promote a fair, orderly, efficient and growing corporate loan market, and provide leadership in advancing and balancing the interests of all market participants.

As part of the implementation of the new Protocol, the LSTA has introduced the new Primary Allocation Confirmation (the Primary Confirm) along with the related standard terms and conditions. In connection with the new Protocol, the LSTA has made substantial revisions to the Par/Near Par Trade Confirmation’s standard terms and conditions (the Par Confirm). It is important to note that all LSTA loan trades (both Par and Distressed) entered into on and after March 16 will be required to use the new form documentation. 

The Protocol applies to an “Allocation” of new or additional money commitments provided to lenders in connection with (1) a new issue syndication or (2) an amendment to an existing Credit Agreement. Additionally, the Protocol affects secondary trades by adding two new types of when-issued trades (1) Pre-Trigger Trades and (2) Post-Trigger Trades. The secondary documentation has been amended to reflect these additions.

However, it is important to note that Delayed Compensation, and therefore the Primary Confirm, will not apply where: (i) the Seller and the Administrative Agent (the Agent) are neither the same Entity nor Affiliates, (ii) the Buyer fails to meet the Due Diligence Requirements of both Seller and the Agent, or (iii) an Allocation settles by Participation and not by Assignment.