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On behalf of the entire LSTA team, we are proud to share with you the Summer 2019 edition of Loans Magazine.
This edition provides members with valuable content on the latest developments in the syndicated loan market. An article from David Chmiel of Global Torchlight Limited which explores “Current Geopolitical Trends Impacting the Loan Market”. We continue with a series of articles on the many aspects of the LIBOR/SOFR transition, an analysis of the secondary loan […]
There is good news – and less good news – on LIBOR fallback language in cash products like loans, FRNs and CLOs. On the good news front, it looks like most cash products are now including fallback language in new deals. This is critical because many instruments will be outstanding when LIBOR ends after 2021, and if they don’t have good fallback language, there could be contract frustration (and litigation). However, on the less-good-news front, the fallback language is not always consistent (which may lead to a lot of work to determine exactly how each instrument would fall back) or workable en masse (which may lead to traffic jams as everyone tries to amend their deals at the same time). We discuss the fallback status of FRNs and loans below. (And we’d gently remind readers that several CLOs have gone “hardwired”, per LCD and Covenant Review).
Ten Quick Facts About LIBOR: The Problem and the Potential Solution
Tess Virmani, Associate General Counsel & Senior Vice President, Public Policy will be presenting “Life After LIBOR” at the APLMA’s event at BNP Paribas in Hong Kong.
Tess Virmani, Associate General Counsel & Senior Vice President, Public Policy, will be presenting on LIBOR fallback language at Risk.net’s LIBOR Clinic USA 2019 in New York City
According to LCD, and illustrated in the COW, there have been at least 145 U.S. CLOs issued thus far in 2019. That represents 145 opportunities to put in stronger, more robust, more workable LIBOR fallback language into CLOs. While most 2019 CLOs used “amendment” fallback language – which might be challenging to execute en masse when LIBOR ends – we were gratified to hear that several recent CLOs included more robust hardwired fallback language. Below, we discuss why good fallbacks are critical and highlight a recent CLO that used more robust, more-ARRC-able fallback language.
As the nearby story reports, we are quite excited to see a new CLO with “hardwired” LIBOR fallback language. (Hardwired fallback language is what is being used in FRNs, and generally states that, upon LIBOR cessation, the contract falls back to a version of SOFR plus a compensating spread adjustment.)
This week we cover Are Loans Rational? Risk Retention Returns? 2Q19 Trading & FASB LIBOR Relief
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