Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Credit risk definition

What does Credit risk mean? The risk that a borrower, issuer or other obligor fails to perform payment obligations when due, causing loss to the lender, bondholder or counterparty. In practice, it assesses the likelihood and severity of default (creditworthiness and recovery), influenced by financial strength, security, guarantees, subordination, covenants, and sector or sovereign factors. It is a descriptive term used across banking, capital markets and derivatives rather than a term defined by general contract law; prudential regulation in the UK and Ireland (for example, PRA/FCA/CBI and CRR rules) applies technical measures of credit risk for capital adequacy. Government bonds of developed...

Defaulting lender provisions in UK syndicated loans—LMA leveraged forms: definitions, borrower and syndicate remedies, voting effects, revolving facility term-out, and non-acceptable letter of credit lenders

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Practice notes

Defaulting lender provisions

Borrowers aren’t the only parties that may encounter financial strain. If a lender fails to honour its funding obligations under a loan, the borrower might be unable to meet its own liabilities, with knock-on consequences for other lenders if the borrower’s repayment capacity is affected.

The Loan Market Association’s (LMA) recommended senior multicurrency term and revolving facilities agreement (compounded rate/term rate) for leveraged acquisition finance (the LMA leveraged facilities agreement), together with the other LMA leveraged finance forms, includes measures to address potential issues on syndicated facilities where a finance party risks non-performance. Although the LMA’s investment grade documentation does not feature these provisions, parties may choose to include them in other syndicated facility agreements. The LMA’s standard form documents are available to members via the LMA website.

As only a small share of facility agreements contain defaulting lender provisions, this Practice Note also considers the position where such provisions have not been included...

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Web page updated on 21/05/2026

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