Last month the Loan Market Association (LMA) published amended standard terms and conditions (STCs) for par and distressed debt trades and an updated suite of funded and risk participation agreements that are effective on March 17, 2026. The revisions principally relate to (1) streamlining the elevation process for participations; (2) updates to ERISA representations to include additional exemptions from the prohibited transaction rules; and (3) removal of all remaining references to LIBOR and screen rate concepts.
Streamlining the Elevation Process for Participations
Before the March 17 updates to the participation agreements, if a participant made use of the elevation request process in the participation agreements and was given the ability to become lender of record, it would need to agree and enter into an additional document, a bilateral termination and transfer agreement, with the grantor.
The new elevation mechanic provides for an automatic termination of the elevated participation (or part of it, if not fully elevating) on the date the transfer document relating to the elevation becomes effective. The new language also includes (1) a set of basic representations given by each party on the elevation date; (2) confidentiality provisions; (3) a costs and expenses clause under which each party agrees to bear their own cost of the elevation; and (4) a further assurance provision. These terms mirror those included in the bilateral termination and transfer agreement.
Parties will be able to enter into bilateral termination and transfer agreements over and above the new elevation mechanism if they wish. However, our expectation is that market participants will be content to proceed without those agreements for participations entered into after using the new recommended forms. Elevations of participations entered into before March 17, 2026 are likely to still require bilateral termination and transfer agreements.
Expanded ERISA Representations
Preexisting ERISA representations given by buyers and sellers in the STCs and grantors and participants in participation agreements have been updated to account for the latest exemptions from the prohibited transactions rules for U.S. employee benefit plans contained in Section 406 of ERISA and Section 4975 of the Internal Revenue Code. In particular, exemptions relating to the qualified professional asset managers regime have been expanded.
Removal of LIBOR References and Screen Rate Concepts
LIBOR ceased to be available, even for “hard case” legacy loans, on September 20, 2024 and has been removed from the primary LMA loan documents. Screen rate concepts have also been removed. All remaining IBOR rate definitions have been updated with relevant consequential changes and revisions to reflect their current rate administrators and publication times.
Though it is important to bring the STCs in line with the primary documents, these changes will have little impact on market participants since these changes have been working their way through the loan market for almost a decade.
With over 25 years of experience in assisting buyers and sellers in purchases and sales of par and distressed loans and claims, our debt trading team at Alston & Bird is available to assist clients with all of their LMA trading needs.
If you have any questions, or would like additional information, please contact one of the attorneys on our Distressed Debt & Claims Trading team.
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