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In March 2013 the Loan Market Association (LMA) announced to its
members that it would no longer be publishing revised forms of its
Mandatory Costs Schedule to take account of changes to the UK
regulatory fee structure and on 1 April 2013 the recommended form
of that schedule was withdrawn from its website. Apparently agent
banks had been finding that the calculation of Mandatory Costs
under the LMA's formula was becoming increasingly complex given
the broad mix of lenders in syndicates.
Provisions in financing agreements usually allow for the parties
to agree to changes in the calculation of Mandatory Costs so
existing agreements can be dealt with as necessary between the
parties to them.
For agreements put in place since 1 April 2013, a number of
options are available – some suggested by the LMA for
syndicated lending. In bilateral loans, Mandatory Costs are often
broadly defined as being determined by the lender (without
reference to a formula) in any event. Alternatively lenders have
the option of not charging for them separately, but either adding
them to the interest rate margin or absorbing them.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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