Lma Subordination Agreement

LMA Subordination Agreement: An Overview

A subordination agreement is a legal document that establishes the priority of debt payments in case of default. It outlines the order in which creditors will be paid and can serve as a form of security for lenders. LMA, or Loan Market Association, is a trade association that represents the interests of the syndicated loan market in the UK and Europe. An LMA subordination agreement is a document that sets out the terms and conditions of subordination of debt in relation to the syndicated loan market.

Why Do You Need an LMA Subordination Agreement?

An LMA subordination agreement is an essential document when structuring a syndicated loan. It provides a framework for creditors to agree on the order in which they will be paid if the borrower defaults. Without this agreement, there can be confusion and disputes between lenders, potentially leading to delays in debt recovery.

Key Terms in an LMA Subordination Agreement

There are several key terms that are typically included in an LMA subordination agreement:

1. Senior creditor: This refers to the lender with the highest priority for repayment in case of default.

2. Junior creditor: This refers to the lender with lower priority for repayment in case of default.

3. Subordination: This is the process of assigning a lower priority to a creditor in the repayment order.

4. Intercreditor agreement: This is an agreement between creditors that governs their relationship with each other and the borrower.

5. Waterfall: This is the order in which creditors will be paid in case of default.

Benefits of an LMA Subordination Agreement

An LMA subordination agreement has several benefits for both lenders and borrowers:

1. Clarity: The agreement provides clear guidelines for the treatment of debt in the event of default.

2. Security: The agreement can provide security for lenders, as they have a clear understanding of their position in the repayment order.

3. Efficiency: The agreement can help to prevent disputes and delays in debt recovery.

Conclusion

An LMA subordination agreement is an essential document when structuring a syndicated loan. It provides clarity and security for creditors, and can help to prevent disputes and delays in debt recovery. As a professional, I hope this article has provided a useful overview of the key terms and benefits of an LMA subordination agreement.