August 26, 2016, New York, NY– In observance of Labor Day, the Loan Syndications and Trading Association (LSTA) recommends treating Monday, September 5 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.
August 19, 2016 - In light of significant losses suffered during the financial crisis, the Dodd-Frank Act mandated that the regulators issue rules prohibiting incentive based compensation that encouraged "inappropriate" risk-taking. While banks have long been in the spotlight, large investment advisers also are subject to the rules. Below, we recap the recently reproposed rule on “Incentive-Based Compensation Arrangements” and discuss the LSTA’s response. In brief, the LSTA made two arguments. First, the rule should only look at proprietary assets. Second, investment advisers that are subsidiaries of large covered institutions generally should be regulated based on their own asset size, and not the asset size of the parent.
August 18, 2016 - LSTA has published the Exposure Draft of the updated version of the LSTA Guidance Regarding US Sanctions Issues in Lending Transactions. The LSTA Sanctions Guidance now reflects the many critical developments in this area since our Guidance was first published in 1Q14. The Guidance sets out the key Office of Foreign Assets Control (OFAC) prohibitions relevant to those involved in lending transactions and offers critical tips for how lenders should protect themselves from sanctions-related risks when negotiating credit agreements.
August 18, 2016 - Secondary US loan trading volumes totaled just $42.6 billion during July – a 33% drop from June – and the lowest monthly tally since November 2014. At $349 billion (through July), 2016 trade activity is down 2% from the same period last year while the market’s annualized turn-over ratio has fallen to 69% from 74%. Interestingly, as volumes hit their nadir in July, market breadth (the number of loans traded) increased to 1,370 - a 12-month high. Offsetting the improved market breadth however, was lower depth levels (trade frequency per loan) – the percentage of loans trading less than ten times per month increased to a 2016 high of 42% in July.
August 10, 2016 - While the SNC Review (analyzed here) was the big news two weeks ago, we shouldn’t neglect last week’s release of the Federal Reserve’s 2Q16 Senior Loan Officer Opinion (SLOO) Survey. The big takeaways? First, on net, banks said they tightened terms in 2Q16 relative to 1Q16. And, second, relative to the last 11 years, overall loan terms are generally slightly easier, but "below investment grade" loan terms saw terms tighten (slightly). We detail the more interesting survey results below and compare them to what we see in the market.