1. Introduction -

Over the last few years, there have been ongoing discussions and a series of initiatives aimed at developing a “Pan-European Private Placement Market” (PEPP Market) for private placement transactions between European issuers and European investors.1 To date, however, the private placement market in Europe remains largely fragmented and regionalized. Among the perceived barriers to the development of the PEPP Market are unfavorable tax and accounting treatment in some European jurisdictions, a tendency towards regionalization, the lack of a perceived need for a separate European market, no established track record for the market and the absence of standardized documentation for this market. In an effort to help move these initiatives forward, the Loan Market Association (the LMA) recently established a working group of industry participants to produce recommended forms intended for use in the PEPP Market. The hope is that standardized private placement documents, developed specifically for use in the PEPP Market, will help remove certain perceived barriers to the development of a cohesive private placement market in Europe by streamlining the documentation process, establishing market standards and reducing transaction costs.

The LMA recently released proposed forms of documentation, which include a term facility agreement (the LMA Facility Agreement), a subscription agreement (the LMA Subscription Agreement and, together with the LMA Facility Agreement, collectively, the LMA Forms), a form of term sheet, a form of confidentiality agreement, and a Users Guide to the Form of Pan-European Private Placement Documents (the Users Guide). The appropriate LMA Form to be used in a particular private placement transaction is determined based on the structure of the transaction. The LMA Facility Agreement is designed for use in a European private placement structured as a loan transaction, and the LMA Subscription Agreement is designed for use in a European private placement structured as an issuance and sale of notes. The LMA based both forms largely on the LMA’s form of single currency term facility agreement for syndicated bank loans, the basis of many bank loan deals in the European market. The LMA working group intended for this consistency between the two sets of documentation, given that the LMA banking forms (i) may be more familiar to European issuers and (ii) would help make the private placement market a more appealing financing alternative if issuers could line up substantive provisions in their new private placement documentation with those in their existing bank loan documentation.