Process
LMA
The Loan Market Association publishes the standard-form documents most UK loan agreements are built from. LMA-style means the shape is conventional; it does not mean the terms inside it are.
Also called Loan Market Association · LMA documentation · LMA-style facility agreement · LMA standard form
The term sheet you negotiate is a few pages. What follows it commonly runs past a hundred, drafted from the other side's precedent.
| Document | Pages |
|---|---|
| Term sheet | 5 pages |
| Facility and security documents | 100 pages |
Source: /guides/debt-term-sheet-negotiation, which gives the term sheet as a few pages and the long form as commonly past a hundred. Five pages is shown as an illustration of a few; the hundred is a floor, not a maximum.
What the LMA is
A trade body that publishes standard-form documents for the loan market: facility agreements, intercreditor agreements, security documents and the rest of the apparatus a financing runs on.
Most UK loan documentation is built from those forms. When a lender says the documents will be LMA-style, they are saying the architecture will be conventional: the definitions will sit where a lender's counsel expects to find them, the covenant machinery will work the way the market expects, and nobody will need to read the whole thing from a standing start to understand its shape.
That is worth something. It is also frequently misheard. LMA-style describes the shape of the document, not the severity of what has been written into it.
What it is not
It is not regulation, and no one is obliged to use it.
It is not a neutral or borrower-protective baseline either. The standard forms carry optional wording and blanks throughout, and the commercial substance lives in exactly those places: the definitions, the schedules, the thresholds, the carve-outs and the baskets. A facility agreement can be entirely conventional in form and unusually tight in substance, and it will still be described accurately as LMA-style.
And it is not a single document. The forms differ by product and by market, so a leveraged form and an investment-grade form are different animals with different assumptions about what a lender is entitled to control.
The practical consequence is that the phrase carries no information about how demanding your terms are. It answers a question about drafting convention that borrowers rarely need answered, in response to a question about terms that it does not address.
Precedent is not neutral. The drift arrives in the definitions and the schedules, not in the headline clauses.
| Term | Movement |
|---|---|
| Margin and facility amount | Fixed by the sheet |
| Conditions-precedent list | 30–55 on the scale |
| Permitted baskets | 40–62 on the scale |
| Default definitions | 48–70 on the scale |
| Material adverse change | 55–78 on the scale |
| Cash-sweep trigger | 60–82 on the scale |
| EBITDA definition and add-back caps | Costs the most |
Sites of drift named in /guides/debt-term-sheet-negotiation. Relative positions are illustrative of where attention is repaid, not measured data.
Which of your terms come from the standard
More than most borrowers realise, and it is worth knowing which ones, because a convention is a much weaker thing to argue with than a considered position.
The commitment fee on an undrawn revolving facility is the clearest example. UK market convention, following the LMA standard, is a fee of around 35% of the applicable margin, and it is charged that way in most agreements because it is charged that way in most agreements. The equity-cure timing convention is another: on a standard LMA-style provision the borrower can serve a cure notice within roughly ten business days of the compliance certificate and has a further ten to fifteen business days to inject the funds.
Knowing a term is conventional cuts both ways. It tells you that pushing on it is unlikely to be productive, because the lender is not defending a position so much as reproducing a market default. It also tells you that where a document departs from the convention, that departure was a decision somebody made, and it is fair to ask why.
Why lenders start from precedent
Cost, speed and familiarity, and none of those are bad reasons.
Drafting a hundred-page facility agreement from nothing would be expensive and slow, and it would produce a document no credit committee had seen before. Starting from a house precedent, itself built from the standard form, means the lender's counsel is amending a known document rather than authoring an unknown one. That is why deals close in weeks rather than quarters.
The thing to hold onto is that a house precedent is a standard form plus every amendment that lender's counsel has found useful over many deals, and those amendments run in one direction. The starting document is conventional in architecture and lender-favourable in accumulated detail. That is not sharp practice; it is what a precedent is.
Where the drift arrives
Not in the headline clauses, which is what makes it hard to police.
A term sheet is a few pages. The facility agreement and security documents that follow commonly run past a hundred, and they are drafted by the lender's counsel from the lender's precedent. Everything the term sheet fixed, the long form must honour. Everything it left open, the precedent settles.
So the margin does not move, and the facility amount does not move, because those were agreed and are visible. What moves is an EBITDA definition that acquires add-back caps, a cash sweep whose trigger tightens, a material adverse change clause doing quiet work, default and cross-default definitions that widen, permitted baskets that shrink and a conditions-precedent list that grows.
Each change is small, defensible in isolation, and cumulative. The EBITDA definition is usually the most expensive of them, because every leverage covenant, every margin ratchet and every cash-sweep threshold is calculated from it. A definition that quietly caps add-backs reduces headroom on every test for the life of the facility without a single headline number changing.
The standard cure clock runs from the test date, not from the day you notice. It can finish around three months later.
| Step | Window |
|---|---|
| Compliance certificate delivered | Week 4 to 9 |
| Cure notice served | 66–81 on the scale |
| Funds injected | By about week 13 |
Source: /guides/covenant-breach, on a standard LMA-style provision, plotted on a 0 to 13 week axis. The 30 to 60 day certificate window is shown here only to place the cure clock against it; what that window costs a borrower is covered on /library/event-of-default.
The MAC clause specifically
It deserves separate mention because it is the clause most often assumed to be boilerplate and least often read.
A material adverse change provision sits in more than one place in a standard-form agreement. It can be an event of default. It can also sit in the drawing conditions on a revolving facility, where every drawing repeats the representations, so a default, or on some agreements a material adverse change, can block new drawings even where nothing has been accelerated.
That second position is the consequential one, and it is easy to miss. A committed line is committed subject to conditions, and the moment of maximum need is the moment the conditions get read. A borrower relying on an undrawn revolver as liquidity cover should know precisely what could stop the drawing.
What is negotiable
More than borrowers expect in the definitions, and less than they hope in the machinery.
The clause architecture is close to fixed, and arguing with it wastes goodwill on something the lender cannot easily change without making the document unrecognisable to its own credit team. The definitions, thresholds, baskets and carve-outs are where negotiation belongs, because that is where the standard form has blanks and where the precedent has filled them in the lender's favour.
In practice the priorities are the EBITDA definition and its add-back treatment, the covenant levels and the headroom set against the base case, the MAC and default definitions, the permitted baskets that determine what you can do without asking, and the cure rights. Those are the terms that decide how the facility behaves in the year it is tested.
What catches the drift
Process rather than heroics, and the process is unglamorous.
What catches it is a terms grid held from the signed sheet through to completion, with every draft tracked against it line by line, so a change to what was agreed is spotted as a change rather than absorbed as drafting. The value of the grid is that it converts a hundred-page comparison into a short list of deltas, and it makes the conversation about a specific departure rather than a general sense of unease.
The definitions repay attention before the clauses do. That is counterintuitive, because the clauses look like where the obligations are, but the clauses are largely conventional and the definitions are where this particular deal was decided. If you only have time to read one part of the agreement closely, read the definition of EBITDA and the definition of default.
And ask, on any departure from the standard, what commercial concern it addresses. Sometimes the answer is good and specific to your credit. Sometimes the answer reveals that the clause arrived from the precedent rather than from any thinking about your business, which is a much easier thing to remove.
Common questions
What does the LMA do?
The Loan Market Association is a trade body that publishes standard-form loan documents: facility agreements, intercreditor agreements and security documents. Most UK loan documentation is built from those forms, so the architecture of your agreement will be familiar to any lender's counsel who reads it.
Does LMA-style mean the terms are standard?
No. It describes the shape of the document, not the severity of what is written into it. The standard forms carry optional wording and blanks throughout, and the commercial substance lives in exactly those places. An agreement can be entirely conventional in form and unusually tight in substance.
Is an LMA agreement negotiable?
The architecture is close to fixed and arguing with it rarely repays the effort. The definitions, thresholds, baskets and carve-outs are very negotiable, and that is where the standard form has blanks and where a lender's precedent has filled them in its own favour.
Which of my terms come from the LMA standard?
More than most borrowers realise. The commitment fee on an undrawn revolver at around 35% of the applicable margin follows the LMA standard, as does the equity-cure timing: roughly ten business days to serve a cure notice after the compliance certificate, then a further ten to fifteen to inject the funds.
How long is an LMA facility agreement?
The term sheet you negotiate runs to a few pages. The facility agreement and security documents that follow commonly run past a hundred, and they are drafted by the lender's counsel from the lender's own precedent rather than from a neutral starting point.
Where do terms usually drift after the term sheet?
In the definitions and the schedules rather than the headline clauses. An EBITDA definition acquiring add-back caps, a cash sweep whose trigger tightens, a MAC clause doing quiet work, default definitions that widen, permitted baskets that shrink and a conditions-precedent list that grows. Each is small in isolation and they are cumulative.
Which definition matters most?
EBITDA, by some distance. Every leverage covenant, margin ratchet and cash-sweep threshold is calculated from it, so a definition that quietly caps add-backs reduces headroom on every test for the life of the facility without any headline number changing.
How do I stop terms drifting?
A terms grid held from the signed sheet through to completion, with every draft tracked against it line by line, is what catches it, so a change to what was agreed is spotted rather than absorbed. The definitions repay attention before the clauses do, and any departure from the standard is worth asking what commercial concern it addresses.
The full treatment sits in the guide: debt term sheet negotiation.
Related terms
This page explains a term as it is used in the UK lower-mid-market. It is general information, not advice on any particular facility. Terms vary between lenders and between deals, and the drafting in your own agreement governs.