Interest provisions in Loan Market Association (LMA) documentation
Interest provisions in Loan Market Association (LMA) documentation

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Interest provisions in Loan Market Association (LMA) documentation
  • The interest clause in LMA facility agreements
  • Definition of LIBOR, EURIBOR and Benchmark Rate in LMA documents
  • Definition of Screen Rate in LMA documents
  • Intra-day correction, recalculation or republication of a Screen Rate
  • Fallback options where the Screen Rate is unavailable
  • Definition of Interpolated Screen Rate in LMA documents
  • Definition of Reference Bank Rate in LMA documents
  • Provisions in LMA documents relating to Reference Banks
  • Cost of funds
  • more

This Practice Note explains the Loan Market Association (LMA)’s approach to the calculation of interest in its facility documentation. It explains the calculation of interest clause (margin, London Interbank Offer Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR) or other benchmark rate and mandatory costs) before focusing on how the benchmark rate (eg LIBOR) is calculated. In particular it explains:

  1. how the documents define and calculate LIBOR, EURIBOR or other benchmark rate, including how the Screen Rate is calculated—see Definition of LIBOR, EURIBOR and Benchmark Rate in LMA documents and Definition of Screen Rate in LMA documents

  2. implications for drafting of ICE Benchmark Administration Limited taking over the administration of LIBOR

  3. the implications on drafting of the ICE LIBOR Error Policy and the Euribor Intraday Refixing Policy which set out the process of refixing and republishing LIBOR and EURIBOR respectively—see Intra-day correction, recalculation or republication of a Screen Rate

  4. the waterfall of fallbacks if the Screen Rate is not available for a particular currency or tenor—see Changes to the calculation of interest

  5. definitions and provisions relating to the waterfall of fallbacks, including Interpolated Screen Rate, Reference Bank Rates and cost of funds

  6. Replacement of Screen Rate wording inserted by the LMA in order to facilitate amendments in the event a currency is unavailable for a particular benchmark

  7. suggestions as to how