In the absence of a Zero Floor is there an implied term to the effect that the overall interest rate will never fall below the margin?
English law is reluctant to imply terms in contracts, particularly between sophisticated parties. The wording of the interest calculation in LMA style facility agreements is clear and there is no obvious gap that needs completing. Therefore it is unlikely that a court would imply such a term however we would strongly advise a zero floor to provide absolute certainty.
In the absence of a Zero Floor could the overall interest rate be negative?
Yes, adding the negative LIBOR to the margin could, depending on the figures involved, result in a negative interest rate under the facility.
Does an overall negative interest rate require the Lenders to make a payment to the Borrower?
If the overall interest rate itself is negative there will be no requirement in the ordinary course for the Lenders to pay the Borrower. LMA style facility agreements provide only for the payment of interest by the Borrower to the Lenders and it is unlikely that a court would interpret the relevant provisions (or otherwise imply a term) to mean that the Lenders pay the absolute value of a negative interest rate to the Borrower. However, it is important to note that transaction specific terms or circumstances might lead to a different conclusion.