Market flex
Produced in partnership with King & Wood Mallesons
Market flex

The following Banking & Finance guidance note Produced in partnership with King & Wood Mallesons provides comprehensive and up to date legal information covering:

  • Market flex
  • What is a 'market flex' provision?
  • When can market flex be used?
  • What can be flexed?
  • Reverse flex
  • Who decides to flex (and how)?
  • Timing of exercise of market flex provisions
  • The LMA wording

What is a 'market flex' provision?

A market flex provision is designed to give arrangers and underwriters some flexibility as to the terms of a financing following the signing of the relevant facility agreement. This is usually with the intention of helping them achieve a successful syndication. The wording typically provides that the arrangers or underwriters may change certain key terms of the financing in order to make it more attractive to potential lenders. Market flex is usually dealt with in the mandate letter or the arrangement fee letter.

For more information on mandate letters, see Practice Note: Mandate letters.

For more on the role of arrangers in loan transactions, see Practice Note: The finance parties.

When can market flex be used?

Market flex provisions can be used by the arrangers or underwriters before or after the facility documentation is signed.

What can be flexed?

The Loan Market Association (LMA) standard wording (The LMA wording set out below) contemplates a change to the 'pricing, terms and/or structure' of the financing, with an option to stipulate that the overall facility amount must not change. However, the scope of a market flex provision can be heavily negotiated and the final position will vary from deal to deal.

Some flex clauses allow a wide range of changes to the terms of the