Key features in LMA PEPP documentation
Key features in LMA PEPP documentation

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

  • Key features in LMA PEPP documentation
  • Introduction
  • How does the PEPP loan agreement differ from an investment grade syndicated loan agreement?
  • How does the PEPP subscription agreement differ from documents in a public bond issue?
  • Selected key features
  • Conclusion

Introduction

In response to initiatives of European governments to introduce a Pan-European Private Placement (PEPP) market, the Loan Market Association (LMA) has launched a suite of PEPP template documentation. The intention is that the LMA PEPP documents will standardise financing documentation for the PEPP market and assist in developing a uniform practical framework to establish a unified PEPP market.

The LMA PEPP template documents consist of an English law:

  1. loan agreement

  2. note subscription agreement

  3. term sheet

  4. confidentiality agreement, and

  5. user guide

The loan agreement and the note subscription agreement are designed to be alternative forms for a PEPP transaction. Parties are free to choose the format more appropriate to their particular PEPP transaction, which may depend on factors such as:

  1. the borrower’s preferred format, if it has any existing bank debt or notes documentation which it is more familiar with

  2. the regulatory environment to which the borrower is subject, and

  3. the applicable regulatory environment in which the targeted investors operate

Commercial elements and terms are identical in both formats. The forms are intended to be substantively the same, save for necessary structural differences, in order to avoid any arbitrage being obtained between either form of debt.

Whilst these initial templates produced by the LMA are designed for investment-grade borrowers, the LMA notes that the documents and structure will need to be