On 24 July 2024 the Loan Market Association (the "LMA") published an exposure draft form of facility agreement which contemplates an African holding company and various of its subsidiaries as borrowers and/or guarantors, with such obligors being incorporated in Ghana, Kenya, Mauritius, Nigeria, Tanzania, Uganda and/or Zambia (the "LMA Africa Term SOFR Facility Agreement"). The LMA Africa Term SOFR Facility Agreement is English law governed and contemplates USD as the single currency, with interest being calculated by reference to Term SOFR.
Mayer Brown provided input on the LMA Africa Term SOFR Facility Agreement before it was published and is pleased to support the initiative, which should increase documentary standardisation and reduce both execution timelines and costs. As a general matter, this is a very noteworthy development in terms of LMA documentation, being the first time in the LMA's over 25 year history that it has included so many different jurisdiction specific provisions and footnotes in a single document. We commend them for doing so as it should help to ensure that LMA documentation stays relevant and useful in the African syndicated loans market.
The LMA has noted that one of the reasons it published the new document was due to the increasing use of the "Mauritian Holdco" structure "whereby international investment is channelled into a Mauritian parent Holdco and then on-lent to operating subsidiaries in relevant African countries - Mauritius being the go-to African country for investors due its location, stable economic and political landscape, lack of foreign exchange controls, its wealth of double tax treaties with other African countries, not to mention a sophisticated workforce". Whilst we agree that this is indeed a much more common structure now, it is worth noting that the LMA Africa Term SOFR Facility Agreement does not actually require that the parent company of the Group be incorporated in Mauritius. Rather, it assumes that the main parent company is incorporated in one of the seven African jurisdictions referred to above (which could be Mauritius but does not have to be) with various of that parent company's subsidiaries (which are also incorporated in one or more of those seven jurisdictions) being borrowers and/or guarantors.
The LMA Africa Term SOFR Facility Agreement has been reviewed and commented upon by law firms in each of the seven relevant jurisdictions. It has useful references to statutes and regulations in each of those jurisdictions which are regularly relevant in syndicated loans, as well as useful footnotes explaining the types of transactions where optional provisions are relevant and should be retained and those where they may not be required.
The LMA has also confirmed that it intends to publish a new Mauritian law share pledge and all asset security document, using the new security model law for UNCITRAL based security, creating a suite of documents to facilitate loan market investment across Africa that can easily be adapted for use with this new LMA Africa Term SOFR Facility Agreement. We understand that the LMA also intends to produce a User Guide to accompany the new LMA Africa Term SOFR Facility Agreement in due course, most likely when the recommended form is published.
It is worth noting that the new document published by the LMA is an "exposure draft" only. The LMA has stressed that it is not yet in recommended form and the LMA would like market participants to provide comments or feedback on the draft. Any comments may be direct to amelia.slocombe@lma.eu.com with the subject heading "Feedback on LMA Africa Term SOFR Facility Agreement".
Even when a final recommended form of the document is published by the LMA, it will only ever be a starting point for negotiations and cannot cover every possible matter that is relevant to the six countries it covers for all types of obligor and secured asset. It will still be very important for market participants to instruct counsel (both English and in each relevant jurisdiction) who are familiar with transactions of this nature so that deal specific matters can be efficiently and effectively addressed. That being said, this initiative of the LMA is a very welcome development for the market and is another example of the excellent support which the LMA has provided in various ways to the syndicated loans market in Africa in recent years.
The LMA Africa Term SOFR Facility Agreement can be accessed here. Please reach out to Ashley McDermott if you would like to discuss the document, including if you are contemplating providing feedback to the LMA as we would be happy to pass any comments on to them.
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