LMA Loan Facility Agreement: Template, Clauses, and CPs

Drafting an LMA loan facility agreement means selecting the Loan Market Association template that matches your deal’s credit profile and governing law, populating it with the commercial terms already agreed in the term sheet, negotiating a defined set of pressure-point clauses, and then working through the conditions precedent checklist until the facility can be signed and drawn. The templates themselves are published by the LMA, the trade body established in December 1996 to serve the EMEA syndicated and bilateral loan market.¹ They are non-binding recommended forms, meant as a starting point for negotiation rather than a finished contract.²

Before drafting begins, someone on the team needs LMA access. The template library sits behind membership, and membership starts only once the LMA accepts the applicant organization and receives the subscription fee.³ Once inside, members reach more than 230 documents through the LMA’s documentation hub, spanning English, French, German, and South African governing law.⁴ A growing number are also available on LMA.Automate, which produces a populated draft from a dropdown questionnaire covering facility type, currency, amounts, and party details. External counterparties without a subscription can still review and comment on documents shared through the platform.

Pick the Template That Matches the Deal

The first drafting decision is which template to open, because each form carries built-in assumptions about covenant intensity, lender protections, and risk allocation. Reverse-engineering the wrong base document is slow and error-prone.

Investment grade. Highly rated corporate borrowers, lighter covenant packages, fewer restrictive undertakings.
Leveraged finance. Acquisition finance and high-debt structures, with extensive covenants and intercreditor arrangements between senior and mezzanine lenders.⁵
Real estate finance. Property-backed lending, including single-property development, with provisions for valuation, property insurance, and security over specific assets.²
Developing markets. Adapted for lending into emerging economies. The LMA’s 2024 USD Term SOFR facility agreement, for example, is governed by English law but assumes African borrowers and guarantors across jurisdictions such as Ghana, Nigeria, Kenya, and Zambia, structured through Mauritius as a holding company jurisdiction because of its lack of foreign exchange controls and its network of double tax treaties.⁶
Sustainability-linked and green loans. The LMA co-publishes the Sustainability Linked Loan Principles, which frame loans where the margin ratchets down if the borrower meets agreed sustainability performance targets and up if it misses them.⁷

Each category then splits into syndicated and bilateral formats. Syndicated templates carry the multi-party mechanics: agent appointments, voting thresholds, sharing provisions. Bilateral templates strip those out for straightforward one-on-one lending. Pick both axes before you start drafting.

Populate the Template From the Term Sheet

The term sheet is the map. It records the commercial terms the borrower and arrangers have already agreed, and the drafter’s job at this stage is to move those terms into the correct fields of the template: commitment amounts, applicable margins, borrower and guarantor details, interest periods, and the benchmark rate. Interest periods are typically one, three, or six months, and the choice affects payment frequency and hedging strategy.²

Every entity named needs its accurate legal name and registration details. Getting these wrong creates enforceability problems later. Cross-check against certificates of incorporation or equivalent formation documents. Names on email signatures and marketing materials do not count.

Once the informational fields are complete, circulate the draft for internal credit review to confirm the legal language matches the credit approval each participating bank granted. Most of the negotiation time is spent here, reconciling what the credit committee approved with what the template assumes and what the borrower’s counsel is willing to accept.

Work the Clauses That Actually Get Negotiated

The template gives you a full agreement out of the box. Only a handful of provisions genuinely move in negotiation, and those are where a drafter’s attention belongs.

Representations and Information Covenants

Representations are factual statements the borrower makes about its legal status, ownership of assets, tax position, and the legality of the transaction. A materially untrue representation typically triggers an event of default that can lead to acceleration. Representations are usually repeated at regular intervals through the life of the facility, not just at signing.

Information covenants sit alongside and require the borrower to deliver regular financial statements, compliance certificates, and notice of any event of default. LMA templates include a dedicated schedule for the form of compliance certificate, which the borrower’s finance team completes each testing period to demonstrate that financial covenants have been met.²

Financial Covenants

Financial covenants set the quantitative boundaries the borrower must stay within. The most common are a leverage ratio requiring total net debt to EBITDA to remain below a negotiated ceiling (often around 3.5x to 4.0x) and an interest cover ratio requiring EBITDA to exceed finance charges by a specified multiple. Breach generally constitutes an event of default.

In leveraged finance transactions, the market has shifted toward covenant-lite structures, where traditional maintenance covenants tested every quarter are replaced by incurrence covenants that only bite when the borrower takes a specific action, such as incurring additional debt or making an acquisition. That distinction should influence which template you start from.

Events of Default and the MAC Clause

Standard LMA default triggers include non-payment of interest or principal, breach of any representation, breach of undertakings, cross-default on other financial obligations, insolvency proceedings, and a material adverse change in the borrower’s condition. On default, lenders can cancel outstanding commitments and declare all amounts immediately due and payable.

The material adverse change clause is one of the most heavily negotiated provisions. Borrowers push for carve-outs excluding general economic downturns, industry-wide events, and changes in law, unless the event disproportionately affects the borrower compared to similarly situated businesses. Lenders prefer a broad, undefined formulation that preserves their discretion. Where the line lands depends entirely on negotiating leverage.

Agent Roles

In a syndicated deal, at least two administrative roles keep the facility functioning. The Facility Agent handles day-to-day communication between the borrower and the lending group, processes drawdown requests, distributes payments, and circulates notices. The Security Agent holds collateral or guarantees on behalf of all lenders, enabling orderly enforcement if the borrower defaults.² The template names both roles and defines their duties, but the identity of each agent and the scope of any indemnities they receive are commercial points.

Sanctions, Anti-Bribery, and KYC

Modern LMA documentation includes representations and undertakings on sanctions compliance, anti-bribery, and anti-money laundering. Borrowers typically represent that neither they nor their subsidiaries, directors, or officers are the target of sanctions administered by OFAC, the European Union, the United Nations Security Council, or the UK government. A parallel representation covers compliance with anti-bribery laws, including the UK Bribery Act 2010 and the U.S. Foreign Corrupt Practices Act.

KYC in a syndicated loan operates in layers. Arranging banks perform KYC on the borrower and any guarantors, while the facility agent separately conducts its own KYC on the arrangers, each lender, the borrower, and the guarantors.⁸ Requests vary because each institution applies its own risk-based approach rather than a single LMA-mandated checklist. Borrowers should expect different document requests from different lenders in the syndicate, which frequently becomes a source of closing delays.

Close on Conditions Precedent

No funds flow until the borrower satisfies a detailed checklist of conditions precedent. This is where deals stall, and experienced practitioners treat it as a project management exercise. Standard conditions precedent to the first drawdown include:

Constitutional and capacity documents. Certificates of incorporation, articles of association, and board or shareholder resolutions authorizing the borrower to enter the transaction.
Legal opinions. Opinions from borrower’s counsel confirming valid formation, signatory authority, and enforceability of the loan documents, typically qualified by standard assumptions about the governing law.
Financial information. Audited financial statements, budgets, and evidence of any equity contribution from sponsors.
Transaction security. Executed security documents, share pledges, and any required registrations at the relevant companies registry or land registry.
Fee payments. Evidence that arrangement fees, agent fees, and legal advisory fees have been paid or will be paid from the first drawdown.
KYC documentation. All lender-specific know-your-customer requirements satisfied.

Once every item on the schedule is checked off, the parties execute. Execution increasingly happens through secure electronic signature platforms, though some jurisdictions and some lenders still require wet-ink signatures. After execution, the Facility Agent notifies all lenders that the facility is live.

The First Utilization Request

Drafting the agreement is only complete when the borrower can actually draw. The borrower draws down by delivering a utilization request to the Facility Agent. Each request is irrevocable once submitted and must specify the proposed drawdown date, the currency and amount, and the interest period.⁹ Only one loan can be requested per utilization request, and the proposed drawdown date must fall within the availability period defined in the agreement.

Notice periods vary by currency. Sterling drawdowns typically require notice by 10:00 a.m. one business day before the proposed utilization date, while drawdowns in U.S. dollars, euros, or other currencies generally require three business days’ notice.⁹ The Facility Agent checks the request against the agreement’s terms and, if everything complies, instructs lenders to fund their pro rata shares on the utilization date.

Benchmark Rates: Draft With Risk-Free Rates, Not LIBOR

The interest mechanics you draft should reference risk-free rates, not LIBOR. The LMA published exposure drafts of facility agreements using compounded SONIA for sterling and compounded SOFR for U.S. dollars, calculated in arrears over an observation period that starts before the beginning of, and ends before the end of, each interest period.¹⁰ This lag ensures the rate is known slightly before each payment date, giving operational teams time to calculate amounts due. If you are working from an older template that still references LIBOR, update the benchmark rate provisions before anything else; the rate no longer exists for most currencies.

Life After Signing: Amendments and Waivers

Once signed, changing the agreement requires lender consent, and the threshold depends on what is being changed. Most amendments and waivers require majority lender consent, which LMA templates typically define as lenders holding two-thirds (66⅔%) of total commitments. A borrower seeking a covenant waiver needs the support of lenders representing at least that share.

Certain changes require the unanimous consent of every lender in the syndicate. These reserved matters generally include extending repayment dates, reducing the margin or any fees payable, releasing all or substantially all of the transaction security, and changing the majority lender threshold itself. Identify which bucket a proposed change falls into early. Discovering mid-negotiation that a change requires unanimity when one lender is unwilling to agree can derail the entire amendment process.

1
Loan Market Association. About the Loan Market Association
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Loan Market Association. Single Currency Term Facility Agreement for Real Estate Finance Single Property Development Transactions
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Loan Market Association. Membership
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Loan Market Association. LMA Documentation Hub
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Loan Market Association. Intercreditor Agreement for Real Estate Finance Transactions
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Loan Market Association. Developing Markets Syndicated Loan Market
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ICMA Group. Sustainability Linked Loan Principles
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European Banking Authority. Response to Consultation on Guidelines on Risk Factors and Simplified and Enhanced Customer Due Diligence
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U.S. Securities and Exchange Commission. Facility Agreement
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Loan Market Association. Exposure Drafts of Compounded RFR Facilities Agreement