Loan Syndications and Trading News

October 17, 2018 - In May, the federal bank regulatory agencies and the SEC approved a sweeping 373 page proposal to revise the 2013 Volcker Rule and the proposal was formally published in the Federal Register in July kicking off a 90 day comment period.  This week, the LSTA submitted its comment letter, with one full day to spare!  Importantly for the loan and CLO markets, the proposal puts into play the issue of whether banks can own the debt securities of CLOs that hold bonds.  While not taking a position on this issue, the agencies requested comments on a number of questions, such as the definitions of “covered fund”, “ownership interest” and “loan securitization”, changes to any of which could result in the end of the current prohibition.

October 11, 2018 - Third quarter was spotless, S&P/LCD wrote on October 1st. With nary a default in the S&P/LSTA Leveraged Loan Index (LLI), the default rate slid to 1.81% in September, a 10-month low. But that wasn’t prophesied to last long – and it didn’t. On October 4th, American Tire filed for bankruptcy, pushing the loan default rate up to 1.85%. This week, it’s all about Sears. First, Sears hired an advisory firm, then it was reported to have missed vendor payments, then it was reported to be in DIP discussions in the context of a liquidation and, finally, folks are expecting a bankruptcy filing by Monday.

October 11, 2018 - As LSTA followers hopefully know, LIBOR cessation is a major issue facing the loan market. As a member of the ARRC Committee, the LSTA has been working to ease LIBOR transition, and one of the first steps is to develop ARRC recommendations on “LIBOR fallbacks” – in other words, to what rate your loan would fall back if LIBOR were to cease. The first step in developing fallback language is to develop a robust “trigger”, in other words, an event that precipitates the transition from LIBOR to a new reference rate. As we detail below, robust fallback triggers are specific, objective and known to all market participants - and we’ve tried to develop them in the ARRC’s Proposed LIBOR Fallback Consultation.

October 11, 2018 - Two recently published articles raise important questions about the fairness of the US bankruptcy process (a question we will be addressing head on at a panel, “Is the Bankruptcy Code Fair?”, at the LSTA’s 23rd Annual Conference on October 24th).

October 10, 2018 - The State of Delaware recently amended the Delaware Limited Liability Company Act to allow any Delaware limited liability company (LLC) to divide into two or more LLCs pursuant to a plan of division. Working with the LSTA’s Primary Market Committee, the LSTA has published "LSTA Market Advisory - Divisions by Delaware Limited Liability Companies" which explains the amendment, how it could impact credit agreements, and sets out suggested credit agreement language that addresses this type of division.

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