Introduction and Process
The Loan Syndications and Trading Association was formed more than twenty-five years ago, and since that time its mission has been to create a fair, orderly, efficient, and growing corporate loan market that provides leadership in advancing and balancing the interests of all market participants. As part of that core mission, the LSTA’s legal team works to standardize agreements that are typically used by loan market participants. Over the years, the LSTA’s suite of documents has grown, and it currently stands in excess of 200 documents, all of which are available to members on the LSTA website.
The agreements in that library must, of course, periodically be updated to reflect the latest legal, regulatory, and market trends and developments. At times, the LSTA staff initiates a project to create or update one of the LSTA’s forms, and at other times, ideas percolate up from members. That is how the project to update the LSTA 2017 Form of Revolving Credit Agreement (the “Revolver”), which includes a letter of credit subfacility, arose. Once an idea is approved as a new project, the LSTA then works with one of its committees, comprised of interested members, to create or update a form. The process is typically lengthy because all members have a voice in the project. Once the committee has agreed to the draft, it is circulated as an Exposure Draft to all individual LSTA members (currently, about 25,000 people). At that stage, no substantive comments are expected, but often numerous questions about the form are submitted to the LSTA. After about approximately six weeks, the draft agreement is then published in final form.
As the LSTA is a trade association, LSTA staff are very aware of antitrust concerns as they work with members, many of whom are competitors in the loan market, to develop a new form, because the courts have deemed trade associations to be possible “hotbeds of conspiracy.” The antitrust laws are designed to ensure that business is conducted in an open, competitive atmosphere and that competition is not unreasonably restricted. The challenging aspect of complying with antitrust laws is that the general language in which the statutes are written does not specify the exact conduct that would be considered a violation. When the LSTA works to create a new form for members, it is well aware of these concerns and always bears them mind as the consensus-building process gets underway.
New members often query how we can create and agree on new forms without violating the antitrust laws. LSTA members are permitted to negotiate and even ultimately agree on the language in a finalized LSTA form and view the published language as acceptable. However, they are always free to negotiate that form for their individual deals. That is the key distinction, and that is why we can successfully standardize language and agreements for the market and not violate antitrust laws.