Syndicated loans for property investment could be agreed more quickly and market liquidity boosted if new standard documentation takes off, an industry body has said.
The Loan Market Association, Europe’s trade association for syndicated loan markets, will next week launch a 170-page standard document in response to demand from its members.
Syndicated loans – which have become increasingly important for £50m-plus deals in the present debt-starved market – typically take between six to eight weeks to complete. The LMA said variations in the wording of “boiler plate” clauses in contracts often lengthen negotiations between the banks and financial institutions involved.
Mark O’Neill, partner at law firm Allen & Overy, which worked with the LMA on the paperwork standard, said that it could reduce time spent negotiating real estate financing loans by between 15% and 20% if it is widely used.
The new document covers all aspects of a transaction, ranging from agreeing interest and lease payments to splitting the role of agent and security trustee.
Clare Dawson, LMA managing director, said previous initiatives to standardise other types of financial documentation had been widely used by its members. “Standardising documents makes it easier for new investors to come into the market,” she said. “This will bring new liquidity into the market, which means there is more capacity to lend.”
LMA members believe that standardising paperwork for loans will also help to reduce legal risks. It is also hoped that a common procedure for agreeing real estate finance could make the market more attractive to investors, such as pension funds and insurance companies.
