Loan agreements: the borrower’s perspective

The starting point for a syndicated loan to a UK borrower is almost invariably the ‘LMA’ documentation. This includes a tax clause which sets out the circumstances in which the borrower will be required to gross up a lender if interest has to be paid net of tax and provides lenders with a wide-ranging tax indemnity. The borrower will be told that this clause is ‘market standard’. However, it is in certain significant respects too heavily weighted in favour of the lenders. The main borrower concerns are considered below and suggestions are made for resolving them.