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Loan Syndications and Trading News

November 13, 2018 - On November 8, the LSTA hosted a webinar on “Antitrust Issues in Syndicated Loan Transactions” presented by Olivier Antoine, Scott Lessne, and Dan Zelenko of Crowell & Moring.  Although syndicated loan arrangements undoubtedly foster efficiencies for both borrowers and lenders and competition by increasing the overall availability of credit and by spreading risk amongst a group of lenders, the potential exists for the creation of anti-competition agreements and for the impermissible sharing of information at critical points in the syndication process.

November 8, 2018 - Coming off a strong September, new issue institutional loan terms favored borrowers in the beginning of October. However, with rising volatility in the equity markets, terms turned more toward lenders in the latter part of the month. Here is how four stats defined October’s market.

November 8, 2018 - This week, The LSTA returned to Tel Aviv to participate in the 11th Annual Tandem Capital Global Investors Conference.  Why Tel Aviv?  In fact, Israeli investors are intrigued by U.S. leveraged loans for a number of reasons. First, the Israeli economy has been very robust for a number of years with high tech, health care and tourism leading the way.

November 8, 2018 - With interest rates on the rise – the 10-year yield spiked briefly above 3.25% for the first time since 2011, inciting one of the most severe sell-offs in recent memory.  Heightened volatility also battered the fixed income markets, which all reported in red ink.  And that group unfortunately included the loan market, which saw its 14-month long streak of positive returns come to an end.  But there’s a caveat, S&P/LSTA Leveraged Loan Index (LLI) returns were barely negative, at -0.03%, while high grade and high yield bonds lost 1.33% and 1.6%, respectively.   October’s pullback further cemented the loan market’s eminence this year as loan returns (+4%) not only top those of the fixed income markets, they have now surpassed equities as well (+3%).

November 8, 2018 - As LSTA members may know, after receiving a number of extension requests, the comment deadline for the ARRC’s syndicated loan LIBOR fallback consultation was extended toNovember 26, 2018. This will allow sufficient time for banks, investors and – importantly! – companies to answer questions about the type of LIBOR fallbacks they need in their syndicated loan agreements. (As a reminder, a LIBOR fallback is contractual language that answers the question, “If LIBOR ceases, to what rate does my loan fall back?”).

November 6, 2018 - The Alternative Reference Rates Committee (ARRC) announced that it is extending the comment period for public feedback on its LIBOR fallback contract language consultations for floating rate notes and syndicated business loans until November 26, 2018 to provide sufficient time to allow for more thorough feedback. The LSTA, co-chair of the ARRC business loans as CLOs working group, has been deeply involved in the market consultation and has posted several materials to help market participants develop their responses to the consultation. Materials can be found here and the LSTA webcast on the syndicated loans consultation is available here.

November 1, 2018 - After hitting $183 billion in second quarter – the busiest three-month period on record – U.S. secondary loan trading volume fell 13% during the third quarter to $162 billion, according to the LSTA’s 3Q18 Trade Data Study.  Year-over-year though, third quarter volumes increased 17% as S&P/LSTA Leveraged Loan Index (LLI) Outstandings expanded by 16%.  But to be fair, third quarter 2017 turned out to be a weak comp; it was the slowest quarter in two years.  To that point, trading volumes totaled $509 billion across the first three quarters of 2018, an increase of more than 5% over the same period a year prior, but perhaps a bit lower than some might expect given the $138 billion rise in outstandings this year.

October 31, 2018 - The LSTA has published an audio podcast which addresses the concept of a "Shift Date" under LSTA trading documents.

October 30, 2018 - In September the Alternative Reference Rates Committee (the ARRC) released a consultation on LIBOR fallback language for syndicated loans. On October 4th, the LSTA hosted a webcast that detailed the consultation. We also are releasing a series of briefs that explain the fallback proposals and consultation questions to help market participants develop their responses (which are due by November 8th).

October 29, 2018 - On Tuesday, October 23rd, the LSTA Board adopted a primary delayed compensation protocol (the "Protocol") that represents an important step in furthering the LSTA's mission of promoting a fair, orderly, efficient and growing corporate loan market. The Protocol will go into effect on January 1, 2020 and will apply to all "primary" allocations i.e., allocations of new money in connection with new-issue syndications and amendments of existing deals.

We were delighted to host 1,100 members (and future members) at the LSTA’s Annual Loan Conference on October 24th. As befits the times, the conference focused on Managing Risk (today) and Optimizing the Future. Below, we discuss the themes that surfaced during the day, offer the main takeaways and, of course, thank our attendees and 28 sponsor and exhibitors. Most presentations are available on this presentation page of www.lsta.org. 

October 22, 2018 - Today the LSTA has published updated “LSTA Guidance: KYC Considerations for Syndicated Lending and Loan Trading”.  In the light of FinCEN’s new Beneficial Ownership Rule with which covered financial institutions had to comply by May 11, 2018, the LSTA’s KYC Guidance had received renewed attention from our members.  Because of this, we have updated that Guidance, and it now notes that primary lenders would not typically be required to identify and verify the identity of any guarantor under the applicable credit agreement.

October 18, 2018 - Last week marked one of the most severe equity market sell-offs in recent memory as the 10-year treasury yield spiked briefly above 3.25% for the first time since 2011.  During a span of three days, the Dow Jones, S&P 500 and NASDAQ all lost 5% of their value.  Furthermore, October 11th marked the third largest one-day plunge in the history of the Dow, while the NASDAQ recorded its biggest nosedive in seven years.  And despite better market sentiment on Friday, the S&P 500 went on to suffer its worst weekly loss since January 2016.

October 18, 2018 - On September 24th, the Alternative Reference Rates Committee (the ARRC) released a consultation on LIBOR fallback language for syndicated loans. On October 4th, the LSTA hosted a webcast that detailed the consultation. We also are releasing a series of briefs that explain the fallback consultation to help market participants respond to it. (The LSTA was one of the drafters, so we are very familiar with it.)

October 17, 2018 - On Tuesday, October 16th, the Financial Stability Oversight Council (FSOC) publicly discussed a number of market and regulatory issues. Top of the agenda (literally) was LIBOR. Federal Reserve Vice Chairman Randal Quarles provided an update on LIBOR (it’s shrinking), SOFR (it’s growing; note the latest JPM billion SOFR FRN) and fallback language (it should be adopted).

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.

October 4, 2018 - Third quarter 2018 in a nutshell: Loan origination volumes down, spreads up. Or, perhaps, the other way around. Following a deluge of supply in early 2018, leveraged lender appetite was temporarily sated and spreads pushed wider. As spreads widened, repricings and refinancings, the source of recent volume stats (if not actual new lending) tailed off.  In turn, nominal lending volumes dropped a startling amount. But all seasons change, and the loan market is no exception. By late September, borrowers were regaining power, spreads were beginning to slide and repricings were beginning to re-emerge.

October 4, 2018 - Well that turned out to be a strong ending to the third quarter.  Loans outperformed all major asset classes– from equities to treasuries - in September.  After pulling back slightly from overbought territory in August, loan prices once again rallied in the secondary market.  In turn, the S&P/LSTA Leveraged Loan Index (LLI) returned 0.69% in September, lifting third quarter and full year returns to 1.84% and 4.03%, respectively.  Third quarter returns came in at a two-year high on the back of a bullish advancer/decliner ratio of 3:1. Furthermore, market value returns were positive during two (July and September) of the last three months as compared to just once prior to July (all the way back in January!).

October 4, 2018 - On October 2nd, Paul Haskel and James Walker, partners at Richards Kibbe & Orbe LLP, enlightened LSTA members on “Litigation Funding for Credit Investors: 7 Things you Need to Know”.  Speakers explained that increasingly funds that specialize in purchasing distressed credit have been looking to litigation funding as a potential new investment opportunity. This new area of finance provides commercial plaintiffs and law firms with the capital to prosecute complex claims, and can reap large rewards for the litigation funder if the litigation is successful.

October 3, 2018 - On October 2nd we published in final form the LSTA’s Documents for Latin American Cross-Border Transactions which now address issues which arise when the borrowers are located in Chile, Colombia, Mexico, or Peru.  LSTA members may recall that, four years ago, we began to tackle the expansion of our existing suite of documents so that they could be used in certain cross-border transactions.

October 2, 2018 - On Thursday, September 27, 2018, the Loan Syndications and Trading Association (LSTA) Board of Directors elected two new members.

September 26, 2018 - Following a seasonally light July when volumes dipped to an eight month low, U.S. secondary loan trading volume rebounded 10% in August to $56.5 billion.  Secondary trading volumes have totaled $455 billion through August, 5% higher than the same time last year.  Furthermore, when annualized, this year’s volume figure would spike to a fresh record of $683 billion, $48 billion higher than 2017’s record of $635 billion.  And full-year 2018 volumes might even run higher than the annualized figure given how much outstandings have grown since the end of April.

September 24, 2018 (updated September 25, 2018) - On Monday, the Alternative Reference Rates Committee (ARRC) released two LIBOR fallback consultations – one for syndicated business loans and one for Floating Rate Notes (FRNs). The fallback consultation is the first step toward the ARRC issuing standard recommended fallback language, which should reduce systemic risk and avoid a market dislocation if LIBOR were discontinued. (We think we can all agree that avoiding a market dislocation is a worthy goal!).

September 20, 2018 - As many recent articles have noted, the “World’s Most Important Number” - aka LIBOR - may be going away after 2021. How will the world (and, more parochially, the loan market) adapt? Very carefully.

September 20, 2018 (updated September 21, 2018) -  The SEC recently issued a no-action letter to Dechert on behalf of its client, Golub Capital that could have important ramifications for the issuance of middle market balance sheet CLOs issued through Business Development Corporations (BDCs).  The SEC agreed that it would not take enforcement action against Golub’s BDCs if they engage in a series of transactions (described in detail in Dechert’s incoming letter to the SEC) the effect of which would be to allow the BDCs to transfer their loans to affiliated CLOs while allowing the affiliated CLO manager to transfer the risk retention interest to the BDC such that the BDCs rather than the CLO manager will hold the risk retention for the CLOs.  The no-action letter raises a bunch of questions so let’s dive in (and stay for the fascinating postscript).

September 20, 2018 - Despite its August publishing date, there was a considerable coverage of Moody’s recent recovery jeremiad. For those who were engrossed in beach reading and missed the report, Moody’s observed that liquidity is strong today, the U.S. economic outlook is bright and default rates are expected to decline over the coming year. However, when defaults do emerge, recovery given default (RGD) is likely to be lower.

September 13, 2018 - Since its reissuance in 2013, lenders have been periodically confused on exactly what the Leveraged Lending Guidance requires them to do. This week, the regulators sought to clarify their position on supervisory statements, creating considerable conversation and speculation (and potentially a bit more confusion). We discuss all this below – and invite you to hear the Federal Reserve’s perspective on Leveraged Lending at the LSTA Annual Conference on October 24, 2018.

September 13, 2018 - The U.S. Alternative Reference Rates Committee (ARRC) is planning to release a market consultation on LIBOR fallbacks for syndicated loans soon. As Co-Chair of the ARRC Business Loans and CLO Committee, the LSTA is hoping that the consultation is the first step in developing quasi-standardized LIBOR fallback language for loans. We also are hoping that, by responding to the consultation, you will help us help you in this important step!

September 13, 2018 - Much ink has been spilled in this space on the LSTA’s risk retention lawsuit against the SEC and Federal Reserve Board.  But what went into the decision to prepare for litigation and ultimately sue our industry’s primary regulators?

September 6, 2018 - We are all thinking about these issues, in the loan market, and in our own lives. So it stands to reason that these are the themes of the LSTA Annual Loan Conference on October 24th.

September 6, 2018 - It’s been quite the volatile summer in loan land, comparatively speaking of course.   Loan prices once again pulled back during August as the S&P/LSTA Leveraged Loan Index returned just 0.47% (market value returns ran negative at 0.07%).  August performance was in stark contrast to July, which was in starker contrast to May and June.  Back in July, prices in the secondary rallied from oversold territory after falling for two months.  The price rally fueled the LLI’s July return to a six-month best 0.74%.  Surprisingly, July’s market value return (+0.27%) represented just the first positive reading since January.   Even so, loans have returned 3.3% on the year and 4.9% over the last twelve months.  Loan returns have topped each of the other major fixed income asset classes during both time periods, including 10 year Treasuries and High-Grade Bonds, both of which still find themselves in the red.

September 6, 2018 - September 5th was an eventful one for SEC Commissioners, future and past , and eventful as well for the LSTA, which met with the SEC Chairman.  On the Commissioner front, the Senate voted 85-14 to confirm Elad Roisman to be a Republican member of the SEC.  Roisman was most recently the chief counsel on the Senate Banking Committee and succeeds Michael Piwowar, who stepped down from the SEC in July.  With the appointment of Roisman, the SEC will once again have the full contingent of five commissioners.

September 6, 2018 - On Wednesday, the LSTA hosted a webinar on “Credit Agreements, Divisions of LLCs and the New Delaware Law” presented by Emin Guseynov of Orrick, Herrington & Sutcliffe LLP and Sabrina Rusnak-Carlson  of THL Credit.  On August 1, 2018, an amendment to the Delaware Limited Liability Company Act took effect which enables a limited liability company (LLC) to divide into two or more newly formed LLCs with the dividing company continuing its existence or terminating its existence from and after the effectiveness of the certificate of division.

September 6, 2018 - U.S. secondary loan trading volume fell 22% in July to $51.5 billion but the shortfall didn’t catch market participants by surprise given seasonal trends.  Historically, volumes generally decline  by at least 20% between June and July.  Even though July’s tally marked a year to date low for 2018, it followed the busiest two month stretch ever - the market logged volumes of $63.6 billion in May and then a near-record $66.4 billion in June.

September 6, 2018 - Are you ready to fallback? No, we’re not talking about daylight savings. The Alternative Reference Rates Committee (ARRC), the LSTA, the ABA and the ARRC’s business loans and CLOs working group have been working hard to develop “LIBOR Fallback Language” recommendations for syndicated loans and floating rate notes (FRNs).

August 24, 2018Managing Risk. Optimizing the Future. These are the themes of today's loan market - and of the biggest leveraged loan conference in the world.

August 16, 2018 - As we reported recently, terms have been moving somewhat in favor of lenders in the past several months. Covenant flex has favored lenders and spreads have widened.

August 16, 2018 - Managing Risk. Optimizing the Future.  These are the themes of the LSTA Annual Loan Conference on October 24th – and, indeed, of the loan market today. There are many ways that we are managing risk: At the highest level, we are managing economic uncertainty, trade friction and geopolitical risk.

August 16, 2018 - Have we all been asking the wrong question? When it comes to predicting the next downturn, there have been countless articles discussing what inning we are in – enough already! – and comparing today’s loan terms to those in 2007.

August 13, 2018 - On August 10th, the LSTA advisory published its new New ERISA Representations for LSTA MCAPs” market advisory. This advisory replaces the guidance contained in the LSTA’s September 2017 advisory on ERISA representations required under the Department of Labor (DOL)’s 2016 Fiduciary Rule. As previously advised, the DOL’s 2016 Fiduciary Rule has been vacated and no longer applies in the US, and therefore the scope of the ERISA representations required from lenders is significantly narrowed.

August 9, 2018 - Fiery headlines notwithstanding, syndicated loan terms apparently are not the easiest they have ever been. How do we know? The Federal Reserve told us (and Senior Loan Officers told them).

August 9, 2018 - While the major regulation that we have seen in the past decade has ebbed, there continue to be a number of new rules that could affect the loan market. We detail a recent SEC release – and the industry response – below.

August 6, 2018 - Today the LSTA has released two new podcasts in its Documents Series; one deals with oral binding trades and the other explains “DQ Lists”.

August 2, 2018 - Following two months of lackluster performance with returns averaging just 0.14%, the S&P/LSTA Leveraged Loan Index (LLI) returned a six-month best 0.74% in July.  Better still: the LLI produced its first positive MV return (0.27%) since January as traders took advantage of oversold territory.  Prices in the secondary market went on to rally 34 basis points in July, erasing all of June’s pullback and more.  At 98.4, the LLI’s average bid level is still roughly 30 basis points off its 2018 high watermark established back in February.   Even so, loans have returned 2.9% on the year and 4.4% over the last twelve months.  Loan returns have topped each of the other major fixed income asset classes during both time periods, including 10 year Treasuries and High-Grade Bonds, both of which still find themselves in the red.

August 2, 2018 - LSTA published an updated version of the “LSTA Regulatory Guidance: US Sanctions Issues in Lending Transactions”.  Given the U.S. Government’s activity in this area, we are updating this particular Guidance in our series at least a couple of times per year.  This latest update addresses new developments with respect to Venezuela, Iran, and President Trump’s termination of the United States’ participation in the U.N.’s 2015 Joint Comprehensive Plan of Action, including a discussion of the specified wind-down periods with respect to activities permitted under the JCPOA.

August 2, 2018 - Default articles may chronicle the past. After all, today’s defaults are dictated by terms and conditions of deals structured years earlier, borrower behavior in the ensuing years – and often already are priced into the market. With that caveat, we nonetheless i) celebrate today’s low default rate, ii) consider tomorrow’s default forecasts, and iii) discuss general structural trends (and U-turns) this year.

August 1, 2018 - SOFR – the potential risk-free replacement rate for LIBOR – has made a number of strides in its short life. The Federal Reserve Bank of New York (FRBNY) began publishing SOFR, which is the combination of three existing risk-free reference overnight repo rates, in early April. In early May, the CME began trading SOFR futures.

July 31, 2018 - LSTA’s Latin American Initiative was launched in 2015, and the suite of LSTA standard documents available for that region continues to expand.  The project was initially launched in response to requests made by some of our sell-side members who were modifying LSTA documents when they sought to trade loans made under New York law governed credit agreements to borrowers located outside the US -- in particular, in Latin America -- and asked that we take this on as a project and standardise the modifications they were having to do for each transaction.

July 26, 2018 - According to the LSTA’s recent Trade Data Study, U.S. secondary loan trading volume increased 12% during the second quarter to a record $183 billion.  The quarter ended much busier than it began as volumes spiked 20% in May and another 4% in June.  May’s $64 billion tally was then a 15-month best, while June’s $66.4 billion came in as the second busiest month on record.  Additionally, as monthly volumes approached record highs, the number of loans traded during May and again in June shot past 1,500 for the first time ever.

July 26, 2018 - Is good news boring (and possibly fleeting)?

July 26, 2018 - The LSTA has added a podcast on “The LSTA’s Form of Assignment Agreement” to its Podcast Series.  The Podcast Series was launched this year at the request of its younger members who asked for short introductory level videos that addressed primary or secondary loan market topics. In the latest podcast, Bridget Marsh, LSTA’s EVP and Deputy General Counsel, highlights issues that may arise when drafting the form which is then attached as an exhibit to the applicable credit agreement and explains other issues which may arise when completing the form as an assignor/assignee.

July 24, 2018 - On Thursday, July 19th, the Alternative Reference Rates Committee (ARRC) went public with its SOFR status and plans. Specifically, the ARRC held a public roundtable where it unveiled an “indicative indicative” term SOFR rate, announced that it was ahead of its transition plan, explained many of the Greek letters in ISDA’s public consultation on LIBOR-SOFR spread adjustments, and updated the “LIBOR fallback” plans for FRNs, business loans and securitizations. We recap the revelations below.

July 23, 2018 (updated on July 26, 2018) - It’s been quite a whirlwind in last two weeks as Congress considered its options for an extension of the National Flood Insurance Program (which terminates on July 31st).  Loan market participants are keenly interested in the result because the current NFIP requires mandatory insurance for corporate borrowers and charges lenders with enforcing the mandate.  Loan market participants have been seeking to carve out the mandatory commercial insurance requirement as part of any extension of NFIP because it is burdensome and does not provide a meaningful amount of insurance in the context of middle market and broadly syndicated loans.

July 19, 2018 - Is there no rest for the weary? As of Thursday, S&P/LCD had tracked $76.5 billion of new U.S. CLO issuance from 138 individual issues. This is up from 102 issues and $57 billion the same time a year ago. As the LSTA Chart of the Week indicates, if the current pace keeps up, this would bring us to record issuance of more than $140 billion for the full year.

July 18, 2018 - Question: What do LIBOR transition efforts and ducks have in common? Answer: While there might not appear to be a lot of action on the surface, underneath there’s a flurry of activity going on.  We are now beginning to see (and share) what lies beneath.

July 18, 2018 - Last month the federal bank regulatory agencies and the SEC approved a sweeping 373 page proposal to revise the 2013 Volcker Rule.  This week, the proposal was formally published in the Federal Register, thereby starting the 60 day period for stakeholders to comment.  The proposal would materially loosen restrictions on the ability of banks to engage in proprietary trading.

July 16, 2018 - Work on LIBOR and its potential successors may look like a duck in a pond. A casual observer does not see much action, but underneath the surface there is a flurry of activity.  Now, the official sector is beginning to unveil the work going on.

July 16, 2018 - As previously advised, the DOL’s 2016 Fiduciary Rule has been vacated and no longer applies in the US and this has certain drafting implications for credit agreements. Click here for the draft of the LSTA’s new market advisory on “New ERISA Representations for LSTA MCAPs”.

July 12, 2018 - Loan returns were once again barely positive in June.  Following May’s 0.17% return, the S&P/LSTA Leveraged Loan Index returned just 0.12% in June – a seven-month low.  In total, second quarter returns hit a 10-quarter low of 0.7%. Happily, first half returns still came in at a respectable 2.16% -- and that 2.16% is not too shabby given that high yield bond returns are just 6 basis points through the first six months of the year, while high-grade and 10-year treasuries are firmly in the red at -3.13% and -2.69%, respectively.  That said, market value (MV) returns in the loan market were negative for the fifth month running. (While this was the worst showing in 11 months, MV returns have been positive just once since last November).

July 11, 2018 - Last month, in In re Woodridge, a decision that is making waves in the claims trading market, Judge Kevin Carey of the Delaware Bankruptcy Court Bankruptcy Court ruled that an assignment of promissory notes effected in violation of an express anti-assignment clause was null and void and that the purchaser of the note could not properly file a claim in the debtor’s bankruptcy case.  Does the decision also  raise questions about the assignability of syndicated loans?

July 10, 2018 - Yesterday, the Alternative Reference Rates Committee (ARRC) released its Guiding Principles for more robust LIBOR fallback language in cash product contracts. These voluntary Guiding Principles will be discussed at the ARRC’s Public Roundtable on July 19, 2018. But for those that cannot wait, below we highlight the purpose of these Guiding Principles as well as how they might be used.

July 5, 2018 - Between tariff tiffs, G7 tensions, a volatile equity market and a slumping high-yield bond space, second quarter was pretty rocky in some quarters, Thomson Reuters LPC observed. The loan market, in contrast, was simply rocketing.

July 3, 2018 - On June 28th, the SEC approved amendments to the Open End Fund Liquidity Risk Management Rule (“the rule”), which theoretically could impact loan mutual funds. Below, we discuss the changes in the rule, why they are coming now – and why they might not have a substantial impact on loan mutual funds.

July 2, 2018As reported in Politico, the United States Senate last week easily passed a comprehensive $867 billion farm bill which will now have to be reconciled with a bill narrowly passed by the House.  What does this have to do with the loan market? 

July 2, 2018 - On June 27th, King & Spalding and LSTA hosted an evening seminar on Green Loan, Sustainable Finance & Impact Investing at King & Spalding’s New York office. Cecilia Hong of King & Spalding moderated the panel discussion which included Marilyn Ceci of JPMorgan, Lucie Campos Caresmel of Credit Agricole, Rekha Unnithan of Nuveen and Tess Virmani of LSTA. The discussion examined the development of impact investing in private equity and real estate where investments are made with a view to make a positive social and environmental impact but with returns that are commensurate with traditional investing.

June 28, 2018 - Deal trends might be reversing (slightly). It is still true that, with default rates low, LBO leverage remains high, maintenance covenants are rare and debt cushions are thin. But on strong second quarter supply, power has shifted slightly in favor of lenders – and this has driven a modest tightening of deal terms. We review such trends below.

June 27, 2018 - On Tuesday, the LSTA hosted an afternoon webinar, Recent Developments in Oil and Gas Finance, presented by Jeff Nichols, Gil Porter, and Kraig Grahmann, partners of Haynes and Boone.  After the challenges experienced by the oil and gas industry in 2015 - 2016, the industry entered 2017 cautiously optimistic about the improved outlook, yet bank lenders remained conservative throughout the year, forcing some companies to refinance their debt from high yield bonds and seek investment from PE firms.

June 26, 2018 - On June 25th, ISDA, AFME, ICMA, SIFMA and SIFMA AMG released the eagerly awaited (by us, at least), “IBOR Global Benchmark Transition Report”. While the 54-page tome might seem daunting, we would direct time-limited readers to pages 8-9 for the executive summary and pages 35-36 for an IBOR Transition Practical Checklist. For the particularly time-constrained, we offer a recap below.

June 21, 2018 - After a successful legal challenge, today the Fifth Circuit Court of Appeals issued a mandate vacating the Department of Labor’s Fiduciary Rule.  After receiving much attention since Trump took office and being subject to a number of court challenges, the Fiduciary Rule as adopted in April 2018 will no longer apply.

June 21, 2018 - On June 13th Linda Filardi (Capital One), Alex Spiro (PNC) and Jane Summers (Latham & Watkins) delivered a webcast presentation on Current Deal Terms for Corporate Borrowers and Other Hot Topics. Before highlighting some current market issues, the presenters compared deal terms across the “pro rata”/Term Loan A (TLA) and Term Loan B (TLB) products noting that many of the differences in terms are a result of the different institutions that act as lenders (banks in the case of TLAs and institutional investors in the case of the TLBs) as well as the need for liquidity in the TLB product.

June 21, 2018 - U.S. secondary loan trading volume increased a staggering 20% in May to a 15-month high of $63.6 billion.  The sharp rise in activity was driven by a $21 billion surge in S&P/LSTA Leveraged Loan Index (LLI) Outstandings, which now sit north of $1.03 trillion.  Across 2018, the LLI has experienced a 7% rise in both outstandings (+$69 billion) and facility count (+86 loans).  Today, the index is tracking a record 1,261 loans.  But while the LLI has expanded in size, year-to-date trading volumes ($281 billion) are actually down 3% from the same period last year ($290 billion).

June 21, 2018 - Reading a recent Reuters article on LSTA Chairwoman, Mitali Sohoni, prompted me to reflect on the importance of volunteer service to our industry. Mitali is an extraordinary person and her commitment to our market and the LSTA is exemplary; she absolutely deserves to be lauded.

June 20, 2018 - As LSTA members undoubtedly know, LIBOR potentially will cease after the end of 2021. So how do the rating agencies think about potential LIBOR cessation and its impact on credit? As Moody’s reported in May, “Uncertainty over future of LIBOR is broadly credit negative”. That said, the rating agency is not necessarily opposed to a post-LIBOR world; instead, Moody’s explains that full impact of a potential LIBOR cessation is unclear – and uncertainty in itself is a credit negative. This uncertainty arises for a number of reasons.

June 20, 2018 - As recent missives have suggested, considerable work on potential LIBOR succession is taking place. Helpfully, these efforts increasingly are being unveiled for public consumption. First, the Bank of England recently published a provisional timeline for SONIA, the Sterling Reference Rate. The timeline indicates there will be efforts to develop a term SONIA, which might be similar to term SOFR in the U.S. This is important because cash products like loans and securities need a term reference rate.

June 20, 2018 - As we noted last month, the US Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) published new Customer Due Diligence Requirements for Financial Institutions (the “CDD Rule”) which became effective on May 11, 2018. In connection with the new CDD Rule, FinCEN had also published a Form of Certification Regarding Beneficial Owners of Legal Entity Customers, but the form was not suited to the syndicated loan market.  At the request of members of the LSTA’s Primary Market Committee, the LSTA worked with SIFMA to develop one BOC Form that could be used by their members and loan market participants (BOC Form).

June 14, 2018 - An area of increasing attention in the US loan market is ESG (Environmental, Social and Governance). Thomson Reuters LPC reports global green and sustainable loan issuance has totaled nearly $17 billion, over twice 2017’s totals.  Green bond issuance has led the way in the global debt markets, but green loans are emerging as an intriguing alternative. Although dwarfed by activity in EMEA and the rest of the world, 2018 has seen $2.2 billion of green and sustainable activyt in the Americas.

June 14, 2018 - As equity markets rallied in May (the S&P 500 is now positive on the year at 2%), the loan market barely churned out its sixth consecutive month of positive returns.  The S&P/LSTA Leveraged Loan Index (LLI) returned a three-month-low 0.17% in May, a level that trailed high grade bonds’ 0.45% but bested high yield bonds’ -0.02% return.  At a 2.04% on the year, loan returns not only continued to lead the other major asset classes (from treasuries to equities), they remained the only investment that actually delivered a positive return through April.

June 12, 2018 - In a decision of importance to the distressed loan trading market, the United States Court of Appeals for the 9th Circuit in In re Fagerdala recently held that a bankruptcy court cannot “designate” (disqualify) a lender’s vote on a plan of reorganization simply because (i) it offered to purchase only a subset of available claims in order to block the plan, and/or (ii) blocking the plan will adversely affect the remaining creditors.  As Schulte Roth & Zabel notes in its recent memo, the court reached “a sensible result, ensuring creditors can act in their own economic self-interest.”

June 6, 2018 - At the LSTA’s Annual Asia Conference swing this week, the major takeaway was that, while there are undeniable challenges in the long term, things look (fairly) rosy in the near term.

June 6, 2018 - Over 3700 people attend IMN’s 22nd Annual Global ABS Conference in Barcelona and LSTA general counsel Elliot Ganz participated in two panels, the first on recent regulatory trends and the other on global risk retention.

June 6, 2018 - As part of its ongoing commitment to support operational efficiency initiatives across the global market, the LSTA and LMA jointly published last week a standard Administrative Details Form (“ADF”) to be used by loan market participants across all jurisdictions.   All fund managers and lenders should complete the form (i) for new funds/entities and (ii) when changing details for existing funds/entities.   

May 31, 2018 - The LSTA launched last week the first in a series of podcasts on different LSTA forms.  The maiden podcast discusses the LSTA’s Form of Fronting Letter Agreement which was published in 2017.  This form of letter agreement is designed to be sent by the lead arranger to the co-arranging banks and sets out the terms upon which the co-arrangers will purchase (and sell back) their pro rata shares of any primary allocations that have not timely settled.

May 31, 2018 - This week the Federal Reserve Board approved a sweeping 373 page proposal to revise the 2013 Volcker Rule.  The four other agencies responsible for implementing Volcker are expected to approve the proposal in the coming days.  As the WSJ reports, the proposal would materially loosen restrictions on the ability of banks to engage in proprietary trading.

May 31, 2018 - In the past week, both the LSTA and Bill Dudley, President of the Federal Reserve Bank of New York, exhorted finance professionals to pay attention to the potential end of LIBOR. While we recognize that Mr. Dudley speaks with more gravitas, below we highlight of the Fed speech and dive into the LSTA’s loan takeaways.

May 31, 2018 - There are many things to do as the market prepares for a transition away from LIBOR. One of the first areas of focus is what happens in credit agreements if LIBOR ceases. As we discussed in the LSTA LIBOR Webcast on May 30th, for legacy deals, we encourage market participants to review 1) the long-term suitability of existing fallbacks in credit agreements and 2) the flexibility to amend agreements to select a new rate.

May 30, 2018 - LIBOR may well go away after the end of 2021 – and the $4.3 trillion U.S. syndicated loan market and the $500 billion CLO market must get ready. But there is considerable confusion about why LIBOR may end, what may replace it and what market participants should be doing to prepare. To help clear up the confusion, the LSTA has developed a series of Frequently Asked Questions (and answers).

May 29, 2018 - As the WSJ reported, on May 24th, President Trump signed into law a bipartisan bill enacting a number of important changes to the 2010 Dodd-Frank financial reform law that are good news mainly for community and regional banks.

May 29, 2018Thank you to all our speakers and members who joined us for the LSTA's Blockchain, Cryptocurrencies, and ICOs Program in NYC on May 22nd.  Syndicated loan market blockchain use cases, valuing cryptocurrencies, and how to use tokens to secure financing were some of the hot topics on which speakers shared their insights.

May 28, 2018 – In observance of Memorial Day, the Loan Syndications and Trading Association (LSTA) recommends treating Monday, May 28, 2018 as a loan  market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

May 17, 2018 - Last month, the Securities and Exchange Commission (“SEC”) issued a two-part release (the “Release”) that, as described below, could impact investment managers - including loan managers.  The first part proposes an interpretation (the “Proposed Interpretation”) regarding the standard of conduct the SEC expects from investment advisers and we addressed that previously.  The second part of the Release requests comments regarding enhanced investment adviser regulation (the “Proposed Enhancements”). 

May 16, 2018 - This week the LSTA hosted the ninth installment of its quarterly roundup of Recent Developments in Bankruptcy Law.  As usual, Rich Levin of Jenner & Block focused on a number of key recently-decided bankruptcy cases which raised issues that could impact loan market participants.  In Merit Management v. FTI, the United States Supreme Court narrowed the scope of the financial contract safe harbor, ruling that the plain meaning of Section 546(e) of the Bankruptcy Code “dictates that the only relevant transfer for the purposes of the safe harbor is the transfer that the trustee seeks to avoid’ and not intervening transactions.

May 15, 2018 - The risk retention saga for CLO managers went on from July 2010 until this past week, almost 8 years.  During that time the LSTA filed 6 comment letters with the regulatory agencies, pursued legislation that would mitigate the effects of the final risk retention rule, filed suit against the SEC and Federal Reserve Board, filed 7 legal briefs, and attended countless meetings.  The path was long and challenging, but ultimately successful.  What are some of the political and strategic lessons that can be learned from this long risk retention battle?

May 14, 2018 - At midnight on May 10th, the last opportunity for the government to file a petition for certiorari to the United States Supreme Court in its risk retention litigation with the LSTA expired, with the agencies choosing not to pursue further action. Thus ends a judicial process initiated by the LSTA on November 10, 2014, exactly three and a half years ago.  While much is very clear (managers of pure open market CLOs are exempt from risk retention), other market questions persist (e.g., what about hybrids or EU originator CLOs?).  After a quick review of the most recent events, we will take a deeper dive into how to think about these open issues.

May 11, 2018 - The US Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) published new Customer Due Diligence Requirements for Financial Institutions (the “CDD Rule” which became effective on May 11, 2018.  When FinCEN published the CDD Rule, it noted that beneficial ownership identification and verification of legal entities is one of the core elements of customer due diligence (CDD) and should be a requirement of any covered financial institution’s anti money laundering (AML) program.  The CDD Rule contains explicit CDD requirements for certain financial institutions under the Bank Secrecy Act and requires those financial institutions to identify and verify the identity of the beneficial owners of certain legal entity customers.

May 11, 2018 - At midnight last night, the last opportunity for the government to file a petition for certiorari to the United States Supreme Court in its risk retention litigation with the LSTA expired, with the agencies choosing not to pursue further action.  Thus ends a judicial process initiated by the LSTA on November 10, 2014, exactly three and a half years ago.  This constitutes an important victory for the CLO market and we are delighted that this long journey has ended successfully.

May 10, 2018 - As the US market prepares for a potential post-risk retention world, we look back to see what the CLO market has been doing so far this year – and what the future may bring.

May 10, 2018 - Last month, the Securities and Exchange Commission (“SEC”) issued a two-part release (the “Release”) that, as described below, could impact investment managers - including loan managers..  The first part proposes an interpretation (the “Proposed Interpretation”) regarding the standard of conduct the SEC expects from investment advisers.  The Proposed Interpretation purports to reflect the SEC’s current views of the standards of behavior that apply to investment advisers. However, some elements, according to Cleary Gottlieb, appear to “reflect a higher standard of conduct than is currently required under federal law.”

May 10, 2018 - It’s official. The Fed (and senior loan officers) have spoken: Supply and demand are not balanced. The Fed’s 1Q18 Senior Loan Officer Opinion (SLOO) Survey was published on May 8th and identifies supply/demand dynamics and their impact on loan terms and conditions.  First, large and middle market borrowers simply have lower demand for loans. As TR-LPC charted, nearly one-fifth of the SLOO bank respondents said borrower demand for loans was “moderately weaker”; in fourth quarter 2017, more banks said that borrower demand had strengthened.

May 7, 2018 - FinCEN’s customer due diligence rule (CDD Rule) takes effect on May 11th.  The CDD Rule clarifies and enhances customer due diligence requirements for certain financial institutions under the Bank Secrecy Act and requires covered financial institutions to identify and verify the identity of the beneficial owners of certain legal entity customers.  FinCEN published a form of Certification Regarding Beneficial Owners of Legal Entity Customers (BOC Form) for this purpose, but the form was not suited to the syndicated loan market.

May 3, 2018 - As volatility dissipated in April (the VIX fell six points) and equities and HY bonds traded modestly higher, the loan market churned out its fifth consecutive month of positive returns.  The S&P/LSTA Leveraged Loan Index (LLI) returned a three-month-best 0.41% in April, a level which only trailed high yield bonds’ 0.68% return.  At a 1.8% return on the year, loans not only continued to lead the other major asset classes (from treasuries to equities), they remained the only investment that actually delivered a positive return through April.  That said, market value (MV) returns in the loan market were negative for the third month running, albeit just barely at -0.02%. (In fact, MV returns have been positive just once since November).  That should not be surprising given that two-thirds of the market has been trading above par in the secondary this year.

May 3, 2018 - The loan market has enjoyed a long period of below-trend default rates. But at some point, the cycle will turn and defaults will return. The question, then, is how will today’s loan vintage perform? Below, we discuss new recovery analysis on covenant lite loans, default stats today (and tomorrow), as well as loan document quality trends thus far in 2018.

May 1, 2018 - Why should you care about the potential end of LIBOR? The reality is that LIBOR – as an interbank lending market – has been shrinking since the financial crisis. How big is LIBOR (the interbank market) today? In its Second Report, the Alternative Reference Rates Committee (“ARRC”) estimated that there was roughly $500 million of daily three-month LIBOR trades. By that, they mean one bank borrowing from another bank at approximately LIBOR. These trades, then, become the basis of the quoted LIBOR curve. And this LIBOR curve becomes the reference rate for some $200 trillion of contracts (mostly in swaps, but also in $4 trillion of syndicated loans and $500 billion of U.S. CLOs).

May 1, 2018 - LSTA’s Bridget Marsh and Tess Virmani were joined by Joe Dewey of Holland & Knight and Joshua Ashley Klayman of Morrison & Foerster when they presented on “Blockchain Technology Disrupting the Loan Market” at the World Bank in Washington DC.  All blockchains have certain traits in common; they are distributed in nature and have a mechanism for reaching consensus.

April 26, 2018 - On April 24th, the LSTA hosted nearly 500 attendees at the Annual Operations Conference; there they learned what the future holds. As the Keynote discussed disruptive technology, just imagine a loan market whose participants share permissioned blockchains, aka distributed ledger technology (DLT) – and legacy systems are a thing of the past.

April 26, 2018 - U.S. secondary loan trading volume increased 5% in March to $54.6 billion, bringing first quarter volumes to $164 billion.  Trade activity increased 10% quarter-over-quarter but fell 11% year-over-year.  (To be fair, the comp is tough: first quarter 2017 did set a record at $181.6).  An average of 451 loans traded each day so far this year with daily volumes totaling in excess of $2.6 billion.

April 25, 2018 (updated on April 26, 2018)  - There were three major happenings on the LIBOR/SOFR front this week. First, on April 24th, overnight SOFR and overnight LIBOR converged (at 1.7%) for the first time since SOFR began being published (see chart). Second, it was a fitting date for convergence as “SOFR preparedness” was one of the themes at the LSTA Operations Conference. Third, on April 25th, IBA published its “ICE LIBOR Evolution” paper. The paper discusses efforts to shore up LIBOR to encourage its continuance past the end of 2021, when regulators will no longer compel banks to make LIBOR submissions. We tackle these issues below.

April 20, 2018 - The LSTA is delighted to announce that the 2018 edition of The International Comparative Legal Guide to: Lending & Secured Finance, published by Global Legal Group, is now live and available on our website for LSTA members under "Events and Education - LSTA Publications". The LSTA will also be sending a hard copy of the Guide to our primary contact for each member.

April 19, 2018 - On April 12th, Tess Virmani (LSTA) moderated the "Current State of the Syndicated Loan Market" CLE at the ABA Business Law Section's Spring Meeting in Orlando, which looked at deal term trends and recent policy developments in the corporate loan market. On the legal side, she was joined by Clifton Prabhu (HSBC), Kepler Geertsema (Citigroup) and Melissa Langsdorf (Antares Capital), as well as Ted Basta (LSTA) and Glenn Stewart (SunTrust Robinson Humphrey) who offered the market perspective.

April 19, 2018 - Since the Comptroller of the Currency spoke at Las Vegas in February, rumors have been flying that Leveraged Lending Guidance is dead. In fact, it is not. Below, we discuss what the Comptroller said in his speech as well as recap what we’ve heard – from very good sources – about the future of the Guidance.

April 19, 2018 - On April 3, 2018, the New York Federal Reserve Bank (FRBNY) began publishing SOFR, the Secured Overnight Financing Rate, which is a potential replacement for LIBOR. Unfortunately, shortly thereafter, the FRBNY determined that the volumes of SOFR trades – around $850 billion daily – appeared too high.

March 9, 2018 (updated on April 17, 2018) - Last month, the Senate Committee on the Judiciary’s subcommittee on Oversight, Agency Action, Federal Rights and Federal Courts held a hearing on small company bankruptcy.  Senator Ben Sasse (R. Nebraska) opened the hearing by noting that Chapter 11 is far too costly and complex for small family businesses and is in need of reform, a sentiment shared by all of the panelists.

April 12, 2018 - SOFR – a potential LIBOR replacement rate – is now more than a week old. What have we learned, what are the early challenges, and what are our members saying? We briefly discuss each of these issues below. But on April 24th, we will dive into these issues more extensively at the LSTA Operations Conference. Importantly – nay, critically – at the conference we will begin to dissect the operational challenges of a potential new (and very different) reference rate.

April 11, 2018 - The US market has been happily absorbing the end of risk retention, but the same cannot be said of Europe. To that end, at IMN’s 5th Annual Investors’ Conference on European CLOs and Leveraged Loans, LSTA General Counsel Elliot Ganz participated in a panel on the divergent regulatory environments in Europe and the United States.

April 5, 2018 - It was a big week on the risk retention front. As readers know, the opportunity for the government to file an appeal to the United States Circuit Court for the DC Circuit (DC Circuit) in its risk retention litigation with the LSTA expired at midnight on March 26th with the agencies choosing not to pursue further action in this venue.

April 5, 2018 - On Tuesday, April 3rd, the NY Fed began publishing SOFR – a possible replacement for LIBOR – to great interest (at the LSTA, at least). So, the results thus far? As the Fed data shows, SOFR came out of the box at 1.8% on Day One, climbed to 1.83% on Day Two, and then declined to 1.74% on Day Three.

April 5, 2018 - To be fair, there is volatility out there. But in 1Q18, the loan space was a bastion of stability. At a high level, the primary leveraged loan market seemed actually slow(ish) – at least in comparison to the year-earlier period. As the volume table illustrates, TR-LPC saw leveraged lending declining 33% from 1Q17 levels to $269 billion, while institutional lending slid 37% to $186 billion. S&P/LCD likewise saw a drop in leveraged lending (down 20% to $167 billion) and institutional lending (down 25% to $129 billion). Meanwhile, LFI tracked 1Q18 “priced deals at $243 billion, off 28% from the year-earlier period.

April 5, 2018 - While the headlines read Trump, Tariffs and Trade Wars, loans quietly proved their mettle once again during the first quarter of 2018.  Loans boasted a 1.45% total return (a six-quarter best) while all other major asset classes (from treasuries to equities) bled red ink during the first three months of the year.   And over the same period, return volatility in loan land fell to its lowest level since the summer of 2014.  Case in point, the average 12-month lagging standard deviation of return (SDR) on the S&P/LSTA Leveraged Loan Index (LLI) came in at just 0.29% in March.

April 3, 2018 - As we noted last week, the opportunity for the government to file an appeal to the United States Circuit Court for the DC Circuit (DC Circuit) in its risk retention litigation with the LSTA expired at midnight on March 26th with the agencies choosing not to pursue further action in this venue.  On Tuesday. April 3rd, the critical next – but not final – step happened: The DC Circuit issued a “mandate” to the DC District Court.

April 2, 2018 - LSTA today released the third and final installment of the LSTA's Blockchain and Distributed Ledger Technology White Paper. Building on the general introduction to blockchain technology and the concept of smart contracts discussed in Parts One and Two, Part Three of the LSTA White Paper discusses the potential benefits, challenges, and corporate governance issues associated with blockchain as applied specifically to the loan market.

April 2, 2018 - The LSTA has published the new Form of Incremental Facility Amendment.  Incremental facilities may take the form of tranches of an existing facility (typically referred to under the credit agreement as an "accordion" or "increase") or tranches of an entirely new facility (typically referred to under the credit agreement as a "new incremental tranche" or similar term).

March 28, 2018On March 21, 2018 the LMA and APLMA published a set of Green Loan Principles with the support of the International Capital Market Association (ICMA).

March 27, 2018 - As the clock struck midnight on March 26th, the last opportunity for the government to file an appeal to the United States Circuit Court in its risk retention litigation with the LSTA expired, with the agencies choosing not to pursue further action in this venue. 

March 27, 2018 - Last July, Andrew Bailey, Chief Executive of the UK based Financial Conduct Authority, made a now famous speech where he signaled the potential cessation of LIBOR as early as the end of 2021. While it is not completely clear at this time that the continued quoting of LIBOR as a benchmark rate will actually end or be significantly curtailed we must prepare for that eventuality.

March 26, 2018 – I observance of Good Friday, the Loan Syndications and Trading Association (LSTA) recommends treating Friday, March 30, 2018 as a loan  market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

March 22, 2018 - U.S. secondary loan trading volume decreased 7% in February to $52.2 billion.  (Noting that January came in at a seven-month high of $56.3 billion).  The market has now traded north of $50 billion permonth during four of the previous five months (a seasonally low December broke the trend).  And over that period, an average of 465 loans traded each day with volumes totaling in excess of $2.7 billion per day.  During February, market breadth (the number of unique loans traded) remained robust at 1,465 loans traded - the fourth consecutive month north of 1,450 loans.

March 22, 2018 - Operations is one of the most challenging – and most important – issues in the loan market. So please join us on April 24th at the NY Hilton as banks, buy-side institutions, custodians, trustees, fund administrators, lawyers and vendors come together to discuss current operational challenges and explore how they can be resolved. (Think standards, best practices and technology that can combine to improve efficiency and accuracy in the loan market.)

March 22, 2018 - LIBOR – and the LIBOR-OIS spread – has been rising rapidly in recent months.  What does this mean for the loan market – and for the “End-of-LIBOR” debate?

March 21, 2018 - On March 20th, Lewis Cohen of Hogan Lovells and Joshua Ashley Klayman of Morrison & Foerster presented the LSTA’s afternoon webinar, “Token Sales for Bankers” which built on the topics raised in February’s webinar on cryptocurrencies and examined how blockchain technology and token sales are impacting capital raising.  Not every digital token is a cryptocurrency; rather, a cryptocurrency is a specific type of digital token. It’s estimated that more than $5 billion was raised through token sales in 2017, and that amount is expected to increase exponentially in 2018.

March 20, 2018 - The Fiduciary Rule promulgated by the Department of Labor (DOL) under the Obama administration has garnered a lot of attention since Trump took office and now may be on its way out.  There have been a number of court challenges to the Rule and last week the Fifth Circuit dealt the rule a possibly fatal blow. As explained in a recent Cadwalader Cabinet article, in a split decision, the Court’s majority ruled in favor of the plaintiffs and found that the Fiduciary Rule is “unreasonable,” and that the DOL acted beyond its authority in promulgating the Fiduciary Rule.

March 15, 2018 - For the last few years, defaults have been generally benign (iHeart notwithstanding) and investor demand has been very robust. But presumably these dynamics will change – and when they do, what might be the impact on the loan market? That issue was discussed extensively Wednesday at an RMA Panel on the Leveraged Loan Market moderated by LSTA EVP Meredith Coffey. We recap main themes (and dispel major misconceptions) below.

March 13, 2018 - With two weeks already on the books in March, the secondary loan market has regained its footing over the past five trading sessions.  The average bid level on S&P/LSTA Leveraged Loan Index (LLI) rebounded above 98.5 this week, after falling during three straight sessions to begin the month.  At its current bid level of 98.52, the secondary is now trading 20 basis points shy of its 2018 high water mark reached during the first week of February.  But we all know how that ended.

March 13, 2018 - Are there global solutions to the loan markets’ operational challenges? Last Thursday, the LSTA and the LMA tackled this question in the joint annual Operations Seminar in London.

March 9, 2018 - This week the LSTA hosted its annual legal conference in London jointly with the LMA. After a record number of conference attendees were formally welcomed in addresses delivered by the LSTA’s Executive Director Lee Shaiman and the LMA’s Managing Director Nigel Houghton, global economist, Trevor Williams set the scene for the day’s discussions by giving an overview of economic trends and noted that, although the global economy continues to grow, the UK might be underperforming in this growth trend.

March 8, 2018 - In January, demand was very strong, repricings surged and terms and conditions weakened substantially. While not fun, in February, it gets better: Amid a backdrop of equity market volatility. demand only slightly outpaced supply. Of course, a slight imbalance still is an imbalance, and terms still trended in borrowers’ favor. Below, we recap the highlights and link to deeper dives.

March 8, 2018 - While the ARRC was quiet over year-end, it has gotten a lot livelier during the past fortnight. Below we offer some background on LIBOR and then bring members up to date on recent ARRC efforts. Importantly, we note the LSTA has become a member of the ARRC when it was recently broadened to add cash market players.

March 6, 2018 - Is Leveraged Lending Guidance most likely to be 1) scrapped, 2) refined, or 3) unchanged? Folks reading reports from Comptroller Otting’s talk at SFIG Vegas may well select Option 1 (“scrapped”). However, Option 2 (“refined”) might the more probable answer. Below, we discuss what we heard from Comptroller Otting (live) and Chairman Powell (through testimony).

March 1, 2018 - The LSTA has published Part Two of a three part White Paper on Blockchain and Distributed Ledger Technology (DLT).  Part Two discusses the concept of smart contracts, explains the relationship between traditional legal agreements and computer code, and explores how smart contracts can build on the innovation of blockchain technology and has the potential to allow parties to structure and effectuate transactions in a more efficient and secure manner than traditional contracts.

February 28, 2018 - U.S. secondary loan trading volume increased sharply in January to a seven-month high of $56.3 billion.  January marked the second busiest start to year and a substantial 38% increase over December (noting that monthly volumes actually fell during two of the previous three Januarys).  The market has now traded north of $55 billion permonth during three of the previous four months. And over that period, an average of 460 loans traded each day with volumes totaling in excess of $2.7 billion per day.

February 28, 2018 - As reported by Thomson Reuters LPC, the thousands of CLO-centric attendees at SFIG Vegas this week were buzzing about the U.S. Court of Appeals ruling that said risk retention did not apply to Open Market CLO managers. Conveniently, the LSTA’s Meredith Coffey hosted a panel that asked – and (kind of) answered – “Does Everything Change After the US Court of Appeals Ruling?”

February 28, 2018 - We are pleased to announce the LSTA’s 2018 Loan Market Chronicle is now available.

February 26, 2018 - The LSTA published the exposure draft of the new LSTA Form of Incremental Facility Amendment. Incremental facilities may take the form of tranches of an existing facility (typically referred to under the credit agreement as an "accordion" or "increase") or tranches of an entirely new facility (typically referred to under the credit agreement as a "new incremental tranche" or similar term).

February 23, 2018 - As LSTA members likely know, on February 9, 2018, the US Court of Appeals for the DC Circuit ruled in favor of the LSTA, issuing a decision that risk retention does not apply to open-market CLO managers. The reality is this is (almost) the conclusion of an (almost) eight-year process.

February 22, 2018 - Aside from a short bout of volatility in early February, when the average S&P/LSTA Index price shed 25 bps, the market started 2018 the way it left off 2017: Aggressively.

February 22, 2018 - What is FpML, how has it changed – and why is this going to make my life better? Loan Financial Products Mark-up Language is an open source data exchange standard, developed by the consensus of loan market participants

February 21, 2018 - On February 9, 2018, the US Court of Appeals for the DC Circuit ruled in favor of the LSTA, issuing a decision that risk retention does not apply to open-market CLO managers. However, the story isn’t quite over. The Federal Reserve and the SEC have the opportunity to appeal the ruling in a number of ways.

February 15, 2018 (article updated on February 15, 2018) -  On February 9, 2018, the United States Court of Appeals for the District of Columbia Circuit (the Circuit Court) ruled in favor of the LSTA in its lawsuit against the SEC and Federal Reserve Board. The ruling reversed a December 2016 decision by the DC District Court and held that the risk retention rules promulgated under section 941 of the Dodd-Frank Act cannot be applied to open market CLO managers.

February 14, 2018 – In observance of the Washington’s Birthday, the Loan Syndications and Trading Association (LSTA) recommends treating Monday, February 19, 2018 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

February 13, 2018 - On February 12th, Joshua Klayman, Geoff Peck, and Steven Bleiberg of Morrison & Foerster LLP presented on Cryptocurrencies, Digital Tokens, Initial Coin Offerings, and Token Sales: Is This Virtual Currency Thing for Real?“   Cryptocurrency has many synonyms, including digital token, digital currency, and virtual currency.

February 12, 2018 - Last week, the United States Court of Appeals for the District of Columbia Circuit (the Circuit Court) ruled in favor of the LSTA in its lawsuit against the SEC and Federal Reserve Board, concluding that the risk retention rules promulgated under section 941 of the Dodd-Frank Act cannot be applied to CLO managers.

February 9, 2018 - This morning, the Court of Appeals for the DC Circuit ruled in favor of the LSTA in its lawsuit against the SEC and the Federal Reserve Board, concluding that managers of collateralized loan obligations (CLOs) are not subject to the credit risk retention rules mandated under the Dodd-Frank Act.

February 9, 2018 - The LSTA recently completed two full years of hosting quarterly bankruptcy review webinars when Richard Levin of Jenner Block presented for the eighth time.  Unlike in previous webinars, where the focus was exclusively on bankruptcy cases, this time Mr. Levin began by focusing on two pieces of legislation that could profoundly impact bankruptcy and restructuring in the United States.

February 8, 2018 - Unlike the past few years, CLO formation hit the ground running in January. The market saw US CLO issuance totaling $6.6 billion (via 11 deals) in January and nearly $4 billion more (via eight deals) thus far in February. This is a stark difference from last year when, under the cloud of risk retention, January saw less than $1 billion of CLO issuance. Indeed, one would have to go all the way back to January 2013 to see such a strong start to a year.

February 8, 2018 - Who is CECL and why is everyone talking about him? This week, we explain all. On Tuesday, the LSTA hosted a webinar on the new Current Expected Credit Losses (“CECL”) accounting standard which goes into effect beginning in 2020 for public business entity SEC filers and 2021 for non-SEC filers.  Why should you care?  The new standard will change the way banks and other financial institutions account for expected credit losses.

February 8, 2018 - So that’s what volatility looks like? After a rousing start to the year, where investors pushed into risk assets in January, and were awarded accordingly,  the equity markets have suddenly become extremely volatile in February.  As of press time, we’ve already witnessed the VIX hitting its highest level since 2015 and the S&P 500 registering its biggest one-day sell-off in more than six years – and it’s just February 8th.

February 1, 2018 - The LSTA has published the first part of a three part white paper on Blockchain and Distributed Ledger Technology. The first part includes a primer on blockchain.

February 1, 2018 - Since the tax reform was signed into law last December, LSTA members have wondered what it means for the loan market (and for themselves). We have begun to answer at least part of the first question. On Thursday, January 30, 2018, Jiyeon Lee-Lim, Elena Romanova and Jane Summers, partners at Latham & Watkins, laid bare the new tax rules generated by the Tax Cuts and Jobs Act. While the Act includes important changes impacting businesses and individuals, the panelists highlighted those new tax rules particularly relevant for financings.

February 1, 2018 - This week, LSTA EVP Meredith Coffey sat down with the outgoing LSTA Executive Director Bram Smith and the incoming LSTA Executive Director Lee Shaiman to discuss the last 10 years … and what is on deck for the next 10.

January 30, 2018 - While the largest US banks reported declines in fixed income trading across 2017, annual US secondary loan trading volume increased 7% to a record $635 billion (2014’s $638 billion was the market’s previous high-water).  Given the relative calm that defined last year’s secondary loan market, the median LSTA/TRLPC mark-to-market (MTM) bid-ask spread on the traded universe of loans remained at just 50 basis points since the beginning of the second quarter of 2017 – a string of 9 consecutive months.

January 26, 2018 - Many market participants have been closely following the LSTA’s risk retention lawsuit against the SEC and the Fed and many rumors have come to our attention concerning the status of the case.  Specifically, we have been hearing that the decision would come out this week (it did not) and that we will prevail (we may or we may not).  The following brief summary is meant to describe where we are now and explain what is actually likely to happen in the coming days or weeks.

January 25, 2018 - Last week, we tiptoed into the issue of leverage levels, incrementals and EBITDA adjustments. This week, we go (a little) further into the weeds, discussing covenant lite default and recovery experiences (with caveats) and capital structure trends. While this is not necessarily a heartening topic, we do end with a modest silver lining.

January 25, 2018 - Friday morning, LSTA EVP Meredith Coffey presents at Allied Irish Bank, discussing where we were in 2017, where we are today, and what may be on tap for the next 11 months.

January 24, 2018 - Last year, the fate of Leveraged Lending Guidance was thrown into question when Senator Pat Toomey alleged – and the Government Accountability Office (GAO) confirmed – that it was a Rule for the purposes of the Congressional Review Act (CRA). As we reported in December, Representative Leutkemeyer then wrote to the Federal Reserve, OCC and FDIC to ask what their next steps were in reviewing and possibly reopening the Guidance.

January 23, 2018 - On Monday, after a three-day government shutdown, President Trump signed a temporary continuing resolution funding bill (“CR”) to keep the government running until February 8th.  While most people following the shutdown drama focused on questions like whether soldiers would be paid, courts would stay open or regulatory agencies would function, an issue unrelated to government funding, important to the loan market  but very much connected to the budget issue was the National Flood Insurance Program (“NFIP”).

January 22, 2018 - At its Annual Meeting in New York, members of the Loan Syndications and Trading Association (LSTA) elected three new board members to its 24-member Board of Directors. Mitali Sohoni of Citigroup will replace Brian Callahan of Bank of America Merrill Lynch as the new Association’s Chair.

January 18, 2018 - Today the LSTA hosted its Annual Membership Meeting. After 10 years leading the LSTA as its Executive Director, Bram Smith “handed over the conn” to Lee Shaiman whose appointment was confirmed by the board in December.

January 18, 2018 - Last year, lenders bemoaned the deterioration in loan documentation, such as EBITDA adjustments, incremental baskets and the ability to transfer collateral. This week, Xtract and Covenant Review spilled considerable ink dissecting these 2017 document trends.

January 17, 2018 - On Wednesday, January 17th, LSTA's Bridget Marsh, EVP and Deputy General Counsel, and Tess Virmani, LSTA-SVP and Associate General Counsel, presented on the LSTA and the loan market to the Finance Group of member firm, Debevoise & Plimpton.

January 16, 2018 - As reported in the WSJ, in a move that could have profound implications for the leveraged loan market, early last week Senators John Cornyn, Republican of Texas, and Elizabeth Warren, Democrat of Massachusetts, introduced a bill called the Bankruptcy Venue Reform Act of 2017.  The bill would require companies that file for bankruptcy protection to bring their cases where they have their principal assets or their principal executive offices.

January 12, 2018 - The LSTA published a revised draft of what will become the LSTA Form of Incremental Facility Amendment when finalised later this quarter.  Incremental facilities may take the form of tranches of an existing facility (typically referred to under the credit agreement as an "accordion" or "increase") or tranches of an entirely new facility (typically referred to under the credit agreement as a "new incremental tranche" or similar term). 

January 11, 2018 - As of Thursday mid-day, the U.S. CLO market continued to await its first new deal of 2018. There is in fact a large pipeline of new CLOs, but they are competing against a number of resets trying to get done by the January payment date, LCD noted. Happily, this respite gives us time to reflect on 2017, recap the major trends, contemplate the evolution (or revolution) in the CLO market and consider what may be on tap for 2018 and beyond.

January 11, 2018 - And that’s a wrap.  The S&P/LSTA Leveraged Loan Index (LLI) posted a 4.12% return in 2017 – slightly below the coupon-level return most were expecting.  All told, market-value (MV) losses on LLI loans totaled 0.69% during 2017.  This is a far cry from the outsized 4.8% MV gain of 2016 when total return topped 10% for just the third time since 1997.  But in hindsight, 50% of loans were trading 25 basis points above par in the secondary to begin the year – and that turned out to be a difficult level to maintain.  Not that there was that much downside pressure: Prices proved to be quite stable in 2017, with most loans trading within a very tight band.  All told, the average bid level on the LLI decreased one basis point to end the year at 98.05 after hitting its high water mark (98.62) back in March and its low in November (97.9).  While the average bid fluctuated (a bit), the median price has remained at or above par since September of 2016.  The result? A surge in repricing activity that swept up more than 50% of loans in the LLI. 

January 8, 2018 - In observance of the Birthday of Martin Luther King, Jr. holiday, the Loan Syndications and Trading Association (LSTA) recommends treating Monday, January 15, 2018 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

January 4, 2018 - Well that was one for the record books. Last year’s headline U.S. syndicated lending stats blew through historical highs. When looking at the overall market (including investment grade loans), Thomson Reuters LPC saw U.S. lending top $2.5 trillion for the first time ever. Meanwhile, in the overall leveraged loan space – which TR-LPC and S&P/LCD both measure – TR-LPC tracked $1.4 trillion of lending (up 60% over 2016) and LCD saw $645 billion (up 24%). (The two firms use different collection and calculation methodologies and hence get significantly different results.) TR-LPC and LCD are joined by LevFinInsights when tallying up the institutional market. In that market segment, which is the focus of the remainder of this article, TR-LPC observed $924 billion (up 120%), LCD saw $503 billion (up 49%), and LevFinInsights totaled up $984 billion (for the first time they tracked it).

January 4, 2018 - This week brings a new year – and a new agenda – for the LSTA. In the first two months of the year, there will be several LSTA-hosted events (which we hope you can attend) and a number of presentations by LSTA staff (where we hope to see some of you). We flag these events below, but you can always find out what’s happening at the LSTA by going to the Events page and the On the Go page at www.lsta.org

December 26, 2017 - In observance of New Year’s Day, the Loan Syndications and Trading Association (LSTA) recommends treating Monday, January 1, 2018 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

December 13, 2017 - The Leveraged Lending Guidance story line may be accelerating. In March 2017, Senator Toomey (R-PA) asked the Government Accountability Office (“GAO”) whether Leveraged Lending Guidance was a rule under the Congressional Review Act (“CRA”). 

December 13, 2017 - As the tax reform process grinds on in Washington, Wall Street – and Main Street – are examining how it affects both individuals and companies. (Spoiler: There appear to be winners and losers on both streets.) This week, Moody’s published their third installment of “Debt and Taxes”, which discussed how the tax reform bill could affect different types of companies. We discuss their analysis – and companies’ reaction to the bill – below.

December 13, 2017 - After an extensive executive search process run by Egon Zehnder, today the Loan Syndications and Trading Association (LSTA), the trade association for the corporate loan market, announced that Lee Shaiman will be assuming the role of executive director of LSTA beginning in 2018.

December 11, 2017 - Last Friday, president Trump signed a temporary government funding bill to keep the government funded until December 22nd.  The bill also keeps the National Flood Insurance Program operational through that date.  The NFIP was set to expire last Friday after being extended once at the end of September.  

December 7, 2017 - Two-thousand and seventeen has been quite a year for financial sponsors – at least by the stats. As Thomson Reuters LPC reported (and charted), U.S. lending to private equity companies hit a record high of $588 billion by the end of November. As the LSTA Chart of the Week (“COW”) indicates, this is 50% higher than 2016 levels. Perhaps more impressive is that PE lending already is 11% higher than 2013’s full-year record of $530 billion. While those are astonishingly high numbers – and the year is not quite over – there’s less here than meets the eye. As TR-LPC observes, 81% of that remarkable volume comprises repricings and refinancings.

December 7, 2017 - After a rousing start to the fourth quarter (returns hit 0.6% in October), the S&P/LSTA Leveraged Loan Index (LLI) returned just 0.12% in November.  Loans though, actually outperformed the other fixed income markets where returns were in the red across the board (HY returns were negative 0.27%).  Aiding and abetting the declines were retail investors who seemed to sour on credit products in November; they pulled almost $5 billion from high yield bond mutual funds and roughly $3 billion from loan funds.  On the other hand, equities continued their storied march higher; the S&P 500 tacked on another 3% in November which raised its year-to-date return to a staggering 20% (including dividends).  In the fixed income space, HY bonds have been the top performer at 7.17%, while loan returns have totaled a “coupon-only” 3.71%.  Many expected loan returns to be in the low 4% range by this point in the year but a combination of falling coupons (-52 basis points) and unforeseen market value losses (-68 basis points) have chipped away at total return levels. 

December 6, 2017 - CECL is the acronym du jour. But what is it, what will it mean for loans and what is the LSTA doing? We discuss all below.

December 6, 2017 - The LSTA published an updated version of the "LSTA's Regulatory Guidance: US Sanctions in Lending Transactions".  Because there is significant movement in this area, the LSTA plans to refresh this Guidance quarterly. This latest publication includes important updates about the termination of sanctions against The Sudan, the additional financial sanctions imposed on the Government of Venezuela, and new commentary on the situation in Iran and the Joint Comprehensive Plan of Action.

November 30, 2017 - After we all feared that risk retention would materially hamstring the CLO market, 2017 has gone in a rather different direction. In fact, with several work weeks remaining this year, new 2017 U.S. CLO issuance has hit $107 billion, edging past 2007 to become the second most active year on record. And that’s just if one considers new issuance.

November 29, 2017This week the LSTA hosted the seventh installment of its quarterly roundup of Recent Developments in Bankruptcy Law.  As usual, Rich Levin of Jenner & Block focused on a number of key recently-decided bankruptcy cases which raised issues that could impact loan market participants.

November 28, 2017 - As reported by Bloomberg, the Financial Conduct Authority (FCA) took a step that should help alleviate concerns about the medium term viability of the London interbank rate (LIBOR). The U.K. financial services regulator last Friday confirmed that all 20 banks that participate in LIBOR rate setting have agreed to support the rate through 2021 and will work towards developing an alternative benchmark.  The FCA has been working with the banks to finalize an agreement for them to remain on the panels they currently submit to until the end of 2021, it said in a statement.

November 28, 2017 - The LSTA is reactivating an important working group, the Custodian/Trustee/Fund Administrator Working Group, to focus on a broad array of issues.  The working group’s mission is to represent the common interests of this constituency while ensuring alignment with the core principles of the LSTA and its broader membership.

November 21, 2017 - U.S. secondary loan trading volume increased sharply in October – rising 17% to a five month high of $56 billion.  Contrast this to the prior three months, when volumes averaged just $46 billion, compared to the $57 billion average reported across the first six months of the year.   All told, secondary trade volumes have now tracked to a record $635 billion over the last twelve months.  And over that period, an average of 450 loans traded daily with volumes coming in at $2.7 billion per day. Looking more closely at October liquidity levels, market breadth (the number of unique loans traded) increased back above 1,400 loans for the first time since June.

November 17, 2017 - As reported in Politico, on Tuesday the House of Representatives passed HR 2874, a series of bills that would extend the National Flood Insurance Program (NFIP), which is set to expire on December 8th, for five years.  The good news?  Section 202 of the bill would get rid of the current NFIP mandate that requires flood insurance on commercial properties. The not-so-good news?  The carve-out for commercial properties is not scheduled to kick in until the beginning of 2019.  Why is this important?

November 16, 2017 - After much review and analysis by an LSTA Working Group, Markit Entity Identifier (“MEI”) Guidelines were published this week to clarify when an “MEI” will (and will not) be issued by IHS Markit to loan market participants. 

November 16, 2017 - Last week, new U.S. CLO issuance climbed past $100 billion and this week, it’s aiming for $105 billion.  And this understates actual activity as there also has been $95 billion of refinancing activity and $45 billion of resets, according to Deutsche Bank stats.  According to LCD, the market is up 80% relative to 2016. And, with about four weeks of actual worktime remaining, 2017 is not that far off from 2014’s record $124 billion. But will we get there? Probably not, say CLO analysts.  BAML, Deutsche Bank and Nomura all have their updated 2017 CLO forecasts in the $110 billion context. 

November 16, 2017The LSTA has published its revised LSTA Code of Conduct (Code) and Confidentiality Principles (Principles).

November 16, 2017, New York, NY – In observance of Thanksgiving Day, the Loan Syndications and Trading Association (LSTA) recommends treating Thursday, November 23, 2017 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

November 15, 2017 - This week, the LSTA traveled to Tel Aviv to present a panel before 450 attendees at the Global Markets International Conference on the U.S. institutional corporate loan market.

November 14, 2017 - On November 9th, a week after the House released its tax reform bill, the Senate released its bill. To be sure, getting any bills through Congress has been challenging this year. But if tax reform as proposed passed – and Gary Cohn on Tuesday reiterated that it would – it could dramatically impact the U.S. tax system and tax payers.  Replacing our homeowner hat with our LSTA hat, we spent some time pondering the impact of the tax bills on the corporate loan sector – and the LBO subsector in particular. We focus on the intersection of interest deductibility, lower corporate taxes and expensing of capex. While this is far from simple, we fortunately got some help along the way from Barclays, CreditSights, Moody’s, Akin Gump and Debevoise.

November 9, 2017 - The next few weeks may be chockablock with regulatory goings-on that potentially affect the loan market. We provide a watchlist below, a recent presentation (attached) and will analyze each issue as details emerge.

November 9, 2017 - Defaults are low. Demand is high. And power currently is in the hands of borrowers. In light of this power imbalance – and consequent deterioration in terms – what worries disenfranchised lenders most?  Documentation. When surveyed at the LSTA Conference, 53% of respondents said “Loose Documentation” is their biggest concern.

November 8, 2017 - While there’s been a softer start to November (HY bond and loan prices are already down 61 and 6 basis points, respectively), October was different. The secondary loan market finally caught a sustained bid last month as the S&P/LSTA Leveraged Loan Index (LLI) returned 0.6%.  Not only did October returns represent the second best performance on the year, they marked the first time returns were in the black for two consecutive months since May (September returns totaled 0.4%).  While hard to believe given the strong market backdrop but, market value returns were positive in October for the first time since July and just the second time since April – or just twice in seven months.  And despite the strong October showing, year-to-date market value returns remain in the red for double-B (-0.6%) and single-B (-0.68) rated loans.

November 2, 2017 - U.S. secondary loan trading volume fell 15% to $138 billion during the third quarter, but was off just 2% compared to the same time last year.  Following a scorching start to the year, when first half volumes set a record for a six-month period, third quarter’s sub-$140 billion in activity represented a nine quarter low.

November 2, 2017 - In order to target, build and achieve greater operational efficiency for the loan market, and to have a better understanding of our members’ views on position reconciliation, FpML messaging, blockchain/distributed ledger technology, the LSTA, together with a small group of members representing dealers and buy-side institutions, put together an Operations Industry Initiatives Survey.   92 LSTA members completed the survey.

November 2, 2017 - On Wednesday, the LSTA hosted a CLE webcast featuring William L. Kuhn IV (Executive Vice President and General Counsel of Regulatory, Disclosure and Employment Law) and Tracy Springer (Vice President and Senior Counsel for Global Banking and Commercial Banking) of HSBC on “Regulation W and its Implications for Syndicated Lending”. Regulation W, which implements Sections 23A and 23B of the Federal Reserve Act, provides limits on transactions that US banks and their operating subsidiaries may enter into with their affiliates and can have some surprising consequences in syndicated lending transactions.

November 1, 2017 - On September 26th, the LSTA and K&L Gates hosted the LSTA Women’s Committee Fall Event featuring a panel discussion on Women in the Boardroom.

October 31, 2017 - On October 26th the US Department of the Treasury (“Treasury”) released the third in a series of reports on financial regulation, this one focusing on the asset management and insurance industries.  Of particular interest to all loan market participants but especially managers of loan mutual funds was Treasury’s discussion of, and recommendations on, the Liquidity Risk Management Rules (“Liquidity Rules”) promulgated last October by the SEC.  

October 31, 2017 (article updated on November 2, 2017) - On October 30, 2017, the LSTA, along with a number of other trade associations, submitted a comment letter in response to the Federal Reserve’s “Request for Information Relating to the Production of Rates”. Behind that unprepossessing title is one of the first public steps in possibly moving from LIBOR to a new reference rate for syndicated loans. The next public event occurred on November 2nd, when the Alternative Reference Rates Committee (“ARRC”) held a public roundtable to discuss SOFR as a LIBOR alternative. The LSTA joined a panel on LIBOR and cash products.

October 26, 2017 - This year’s secondary market panel, “A Coupon State of Mind”, was headlined by speakers Mike Clawson (Wells), Jason Friedman (Marathon), David Mechlin (CSAM) and Alex Stromberg (Barclays).  Moderator, Ted Basta (LSTA), and the panelists first put this year’s performance in a historical context. 

October 26, 2017 - The afternoon ended full circle as settlement challenges raised at the onset of the conference were addressed.  In Sizing up the Situation, a majority placed the responsibility for current delays with the Agents, recognizing that “buyers” have met the T+5 requirements.

October 26, 2017 - Tuesday’s LSTA Conference delved into the perspectives of sponsors, buyside and sellside to frame how the market is evolving.

October 26, 2017 - Last week we reported that the Government Accountability Office (“GAO”) issued an opinion that the Leveraged Lending Guidance (“LLG”) was a “rule” subject to the Congressional Review Act (“CRA”) and explained how that ruling could have profound implications for the loan market.

October 26, 2017 - On Tuesday, the LSTA hosted 1,000-plus attendees at its 22nd Annual U.S. Loan Market Conference. Executive Director Bram Smith kicked off the day – and his last conference as LSTA Executive Director – exhorting members to be agents of positive change in the loan market.

October 20, 2017 - Almost one year after oral arguments were heard, the United States Court of Appeals for the Second Circuit issued an opinion in the In re MPM Silicones, L.L.C. (“Momentive”) bankruptcy case.  While four distinct issues were before the court, one of them, whether a debtor in a bankruptcy can “cram down” senior secured creditors with below-market rate replacement notes, was by far the most critical to loan market participants. The key takeaway:

October 19, 2017 - In a step that could have far reaching implications for the loan market, on Thursday, the Government Accountability Office (“GAO”) issued an opinion that Leveraged Lending Guidance (“LLG”) issued jointly by the OCC, the Federal Reserve Board and the FDIC (the “Agencies”) is a “general statement of policy” and therefore considered a “rule” for purposes of the Congressional Review Act (“CRA”) and must be submitted to Congress for review. For the uninitiated, this could be big. Really big. The GAO’s decision is available here.

October 19, 2017 - The multi-year process to prepare for any possible transition from LIBOR to a new loan reference rate has accelerated to a trot. First, on October 10, 2017, the Financial Stability Board (“FSB”) published its progress report on implementation. Second, in the U.S., the Alternative Reference Rates Committee (“ARRC”) established a business loans and CLO working group to help the syndicated loan market prepare for any transition from LIBOR to a new reference rate.

October 19, 2017 - The LSTA this week published exposure drafts of the revised LSTA Code Conduct (“Code”) and the Confidentiality Principles (“Code”). Those drafts are available; additionally, they will be discussed at a two-CLE session at the LSTA Annual Conference next Tuesday.

October 19, 2017 - The LSTA published the new LSTA's Form of Credit Agreement. This is the LSTA's first complete credit agreement and is a revolving credit facility designed for use by investment grade borrowers.

October 17, 2017 - The LSTA published the LSTA’s Form of Fronting Letter Agreement.  The agreement may be used in connection with both committed and uncommitted transactions and describes the fronting by the Lead Arranger and the subsequent interaction between the Lead Arranger and the Co-Arrangers when certain primary allocations have not timely settled.

October 12, 2017 - In addition to risk retention (discussed in detail here), last Friday’s Treasury Report on Capital Markets also identified several other regulatory issues for securitizations and offered recommendations. Wells Fargo’s Lagniappe discussed the Treasury’s proposals for capital charges and High Quality Liquid Assets (“HQLA”), and what their (possibly modest) effects on CLOs might be.

October 11, 2017 (article updated October 12, 2017) - Almost three years from the day it initially filed its lawsuit against the SEC and Federal Reserve Board on risk retention for CLO managers, the LSTA got its “day in court”.  On Tuesday, a three judge panel of the United States Circuit Court for the District of Columbia heard oral arguments from LSTA’s counsel, Richard Klingler of Sidley Austin, and Joshua Chadwick representing the federal agencies.

October 10, 2017 (article updated October 12, 2017) - On Friday, October 6, 2017, the U.S. Treasury Department released its second report (and Fact Sheet) on right-sizing financial regulation.  The LSTA was particularly interested in this report because it tackled rules around securitization, including CLOs and risk retention.  We offer two quick takeaways and one observation.

October 6, 2017 - In response to Executive Order 13772 on Core Principles for Regulating the U.S. Financial System,  the U.S. Department of the Treasury released its long-awaited report on capital markets today. The report recommends that CLO risk retention be less punitive (pp. 102-103). 

October 5, 2017 -Third quarter 2007 saw a flicker of balance in August 2017, bookended by the usual trends: too much institutional lender demand chasing too little loan supply. We discuss the technical trends – and consequent terms and conditions – below.

October 5, 2017 - LSTA published, today, the KYC Guidelines effective as of October 5, 2017. The Guidelines have been updated to account for FinCEN's May 2016 final rule adding a new requirement for covered financial institutions to identify/verify the identity of the beneficial owner of legal entity customers where a bank is required to conduct customer identification and verification procedures. (In many loan market instances, a bank/customer relationship does not arise so this new requirement would not be applicable.)

October 4, 2017 - During the past three months, monthly loan returns have rallied back from negative to positive territory, a trend that continued in September.  The S&P/LSTA Leveraged Loan Index (LLI) returned 0.39% in September after reporting a negative 0.04% in August.  September’s return was entirely coupon driven as secondary market prices remained flat across the month.  During the eight months prior to September, market value returns were equally split between positive and negative.

October 3, 2017 - An LSTA webcast last week (“Out of Court Restructurings Through Credit Agreement Buckets”) detailed situations in which borrowers used credit agreement or indenture buckets to facilitate creative restructurings that may not have been aligned with lenders’ expectations.  We noted then that the panel was timely and events this week certainly confirmed that view.

October 3, 2017 – In observance of Columbus Day, the Loan Syndications and Trading Association (LSTA) recommends treating Monday, October 9, 2017 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

September 28, 2017 - While lenders have been focused on retail woes all year, last week’s bankruptcy filing of Toys ‘R’ Us intensified the attention on the sector specifically – and on credit quality and protections in the loan market generally.  First, the WSJ and Reuters reported that the 2005 LBO debt load made fixing Toys’ secular retail problem nearly impossible.  Next, on the bankruptcy news, Toys’ debt dropped dramatically, as chronicled by LCD and charted in the LSTA Chart of the Week.

September 28, 2017 - In order to help us to serve the loan market, the LSTA embarked on an Operations Survey this week to gain a better understanding of our members’ views on existing and future market technologies – and to determine where we should target our efforts.

September 28, 2017 - This week, over 250 people logged in for an important webinar hosted by the LSTA focusing on “Out of Court Restructurings Through Credit Agreement Buckets”.  LSTA GC Elliot Ganz moderated the panel which included James Millar of Drinker Biddle and Brendan Hayes of Millstein & Co.  The panel was certainly timely.

September 26, 2017 - Today the LSTA has published the Exposure Draft of the LSTA Form of Fronting Letter Agreement.  The agreement may be used in connection with both committed and uncommitted transactions and describes the fronting of a new loan by the Lead Arranger, a ministerial accommodation for the lenders, including the Co-Arrangers, and the subsequent interaction between the Lead Arranger and the Co-Arrangers when certain primary allocations have not timely settled. 

September 21, 2017 - After falling to a 26-month low in July, U.S. secondary loan trading volumes increased 12% during August to $47.4 billion.  And after a very busy six-month run to start the year (and a seasonally slower summer), trading volumes have totaled $434 billion through August.  As the LSTA Chart of the Week indicates, this is a 10% increase over the same period last year.  Better still, over the last 12 months, trade activity has swelled to $636 billion, a significant $30 billion ahead of 2014’s standing record.  This surge in activity has pushed the market’s 12-month turnover ratio to 72% after registering a multi-year low of 68% across 2016.

September 21, 2017 - Last week, Congressman Andy Barr (R-KY) and Congressman David Scott (D-GA) introduced H.R. 3772, the Expanding Proven Financing for American Employers Act. This is the 2017 version of the Qualified CLO bill that the duo sponsored in 2016. As retention aficionados may recall, that bill passed out of the House Financial Services Committee on a bipartisan basis, 42-15, but never made it to the floor of the House. The new bill is almost identical: In effect, if a CLO meets tests in six areas – asset quality, portfolio diversification, CLO capital structure, alignment of interests, regulation of manager, and transparency and disclosure – the manager can purchase and retain the equivalent of 5% of the equity. (Fun fact: In the original bill, the 5% retention was in the form of first loss equity.

September 21, 2017 - At ABS East this week, the LSTA (Meredith Coffey), SFIG (Sairah Burki), CREFC (Mike Flood) and NAIC (Eric Kolchinsky) got together to discuss regulation and the securitization markets, with a particular focus on what (and how) sensible FinReg reforms may materialize. We discuss the takeaways below. 

September 20, 2017 - LSTA’s Bridget Marsh and Practical Law Canada Finance’s Lydia Salvi together have authored a note explaining the Model Credit Agreement Provisions published by the LSTA and those published by the Canadian Bankers Association, an association founded in Montreal in 1891 whose members are the domestic banks and foreign bank subsidiaries and branches operating in Canada.

September 20, 2017 - LSTA members have been politely discussing a very important trend in the loan market, i.e., the use of credit agreement baskets to facilitate restructurings in ways that may not have been contemplated by lenders.  Credit agreements and indentures often contain “baskets” for companies to undertake transactions, such as taking on new debt, so long as they satisfy the conditions and limitations of the basket.   These conditions can include such things as caps on the maximum amount of a given transaction and limitations on the sale or other divestiture of property.

September 14, 2017 - At the ABA Business Law Section Annual Meeting in Chicago, the Syndications and Lender Relations Subcommittee sponsored two excellent programs on the middle market. The Subcommittee, led by Maria Barclay (Chair, Practical Law) and Tess Virmani (Vice-Chair, LSTA) invited Jane Summers and Andrew Fayé, partners at Latham & Watkins, and Kate Grimm, Associate General Counsel at Antares Capital, to present "It's Always Better to Be Direct: A Guide to Direct Lending"

September 14, 2017 - After seven months of issuer friendly technicals, real supply has come on line materially. But, even so, this new supply may not be enough to absorb very considerable demand. We discuss these trends below.

September 14, 2017 - More than seven years after the passage of the Dodd-Frank Act, some of the resulting regulations imposed on CLOs are still being hotly contested.  Indeed, just this week the LSTA learned the identities of the three judges from the D.C. Circuit Court of Appeals that will constitute the panel presiding over the three-year old lawsuit against the SEC and Federal Reserve Board on the issue of risk retention.  Also this week, in response to the OCC’s request for comment on revising the Volcker Rule, the LSTA filed a comment letter addressing the prohibition on banks owning debt securities of CLOs that hold any amount of bonds.

September 12, 2017 - As we have all read, flooding from hurricanes Harvey and Irma have devastated parts of Texas and Florida and those states are assessing the damage and putting the pieces back together.  Although quite minor in the overall scheme of things, the loan market has experienced at least a temporary reversal on an issue related to that flooding, i.e., mandatory flood insurance for commercial properties under the National Flood Insurance Program (NFIP).

September 11, 2017 - LSTA has published a Market Advisory on the Department of Labor’s new Fiduciary Rule, which generally became applicable in June 2017, and the LSTA’s plan to include new ERISA language in the Agency Section of the LSTA's Model Credit Agreement Provisions to address it. Please click here for the LSTA Market Advisory.

September 8, 2017 - The LSTA distributed to membership the exposure draft KYC Guidelines updated to account for FinCEN's May 2016 final rule adding a new requirement for covered financial institutions to identify/verify the identity of the beneficial owner of legal entity customers where a bank is required to conduct customer identification and verification procedures. (In many loan market instances, a bank/customer relationship does not arise so this new requirement would not be applicable.) The rule went effective on July 11, 2016 and covered financial institutions must comply by May 11, 2018.  The KYC Guidelines will be published in final form on Thursday, October 5th.

September 7, 2017 - For the second time in three months, S&P/LSTA Leveraged Loan Index (LLI) total returns were negative, albeit modestly, at -0.04% for both June and August.   Unlike June, where a technical dislocation ended the market’s 15-month positive return streak, geopolitical (and meteorological) tensions dominated the August headlines.  For the first time this year, the markets became extremely volatile.  As hostilities increased between the U.S. and North Korea, the VIX spiked above 15 mid-month to reach its highest since May.  At the same time, S&P LCD’s Loan Volatility Metric (LVM) jumped past 10% for the first time this year.   As a result, investors shed risk and flocked to safe-haven assets. In turn, high grade bonds returned 0.85% while 10-year Treasuries returned 1.6%. 

September 7, 2017 - The multi-year march toward a LIBOR fallback/replacement for derivatives (and possibly loans) has taken another step. On August 27, 2017, the Federal Reserve issued a “Request for Information Relating to Production of Rates”. Behind this unprepossessing title is a call for public feedback on what might become the LIBOR replacement for derivatives. (Any loan fallback would almost definitely require adjustments.) We discuss the background, the Fed’s request and possible LSTA action below.

Sept 5, 2017 - LSTA’s Bridget Marsh recently sat down with Euromoney to discuss the LSTA’s LatAm Initiative on which she’ll present at the Euromoney Latin America Syndicated Loans Conference in Miami from September 28th - 29th. 

Sept 5, 2017 – In August 2017, the LSTA surveyed its board on issues both small (such as 2017 CLO issuance) and large (such as the biggest potential disruption in the loan market in the next five years). Click here to see the results of the survey.

August 31, 2017 - The LSTA published the Exposure Draft of the LSTA’s new Form of Investment Grade Credit Agreement (“Revolver”).  The Revolver will be the LSTA’s first complete credit agreement and will also form the basis for the LSTA’s new Model Credit Agreement Provisions for Investment Grade Revolving Credit Facilities (“IG MCAPs”).  It is premature for the Revolver to address the possible discontinuation of LIBOR; however, the LSTA will continue to monitor this issue and, if necessary, update the Revolver and other forms accordingly at a later date.

August 29, 2017 - In observance of Labor Day, the Loan Syndications and Trading Association (LSTA) recommends treating Monday, September 4, 2017 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

August 24, 2017 - As LIBOR continues to create headlines in a sleepy August market, we wanted to update LSTA members on a number of issues. First, we recap the current state of preparation for a possible LIBOR transition or disruption.  Second, we discuss principles for IBOR fallbacks in the derivatives space. Third, in the loan space, we discuss potential stakeholders (and their needs), and, fourth, provide very early thoughts on how credit documentation could reduce any risk of a market disruption if LIBOR were permanently discontinued. Finally, for comparison purposes, we describe the ISDA fallback approach for IBORs.

August 18, 2017 - The LSTA has distributed to members information relating to the Caesar's Bankruptcy so that those loan market participants who have an interest in that bankruptcy are alerted to information relating to the Caesar's Election, which was launched on August 16th, and the related Election Procedures.

August 17, 2017 - Since the LIBOR speech by Andrew Bailey, Chief Executive of the FCA on July  27th, markets have been buzzing about whether LIBOR is ending, when it might end, and what loans and CLOs would do. On August 17th, the LSTA hosted a webcast walking through i) why LIBOR might end, ii) what the replacement might be, and iii) ways to approach loans and CLOs.  We recap these issues below and encourage you to visit our LIBOR webcast page for slides and a replay.

August 17, 2017This week, there was more news out of Washington. We speak, of course, of tax reform.

August 10, 2017 - On October 24th in NYC, the LSTA is hosting some 1,200 loan market participants at its 22nd Annual Loan Conference. This year, we are focused on risks and opportunities in the world (and loan market) today, tomorrow and five years hence. Considering the current standoff with North Korea (among other issues), geopolitical risk is (or should be) top of everyone’s minds. Good thing, then, that our keynote speaker is James Clapper, the Director of National Intelligence from 2010 to 2017 and a retired Air Force Lieutenant General who served two tours in Southeast Asia.  Clearly, Director Clapper is an accomplished thinker on geopolitical threats. 

August 8, 2017 - Last week the Office of the Comptroller of the Currency (“OCC”), one of the three main banking regulators involved in the promulgation of the final Volcker Rule regulations issued under Section 619 of Dodd Frank, published a notice soliciting public comment on “whether certain aspects of the implementing regulation should be revised to better accomplish the purposes” of the underlying statute.  Why should we care?  While the Volcker Rule regulations did not materially impact the loan market, very expansive (and, arguably, overreaching) interpretations by the regulators of the meanings of the terms “ownership interests” of “covered funds” resulted in the prohibition on banks from purchasing any debt obligations issued by CLOs that were not comprised solely of loans and cash equivalents.

August 7, 2017 - In the light of recent member queries about certain deals in the market, the LSTA has published a Market Advisory highlighting how pro rata provisions in a credit agreement may typically be modified.

August 7, 2017 - Last Wednesday, the Shared National Credit (“SNC”) Review, which assesses credit risk trends in the syndicated loan market, was released. The headline was that riskiness has declined somewhat in the $4.3 trillion portfolio of loan and loan commitments. While that’s fine news, more interesting fare emerged from a deeper dive. To wit, the near-doubling of the leveraged loan portfolio and a warning about how post-close usage of incremental facilities could trigger non-pass originations.

August 3, 2017 - As conversations around LIBOR alternatives continue, the FT reported on Wednesday that “the death of Libor may be exaggerated, particularly in US markets” despite the market buzz following last week’s speech by the Chief Executive of the U.K.’s Financial Conduct Authority (FCA). The FCA has announced it will no longer require banks to submit quotes for LIBOR rates in sterling by the end of 2021, but that does not mean that ICE could not continue to publish the dollar rate. 

August 3, 2017 - This week the LSTA hosted the sixth installment of its quarterly roundup of Recent Developments in Bankruptcy Law.  As usual, Rich Levin of Jenner & Block focused on a number (11, to be exact) of key recently-decided bankruptcy cases that could impact loan market participants.

August 2, 2017 - A recent article by the author of “Fiasco: Blood in the Water on Wall Street” argued that CLOs are the new CDOs. To put it mildly, this is not accurate. Below, we respond to a number of statements in the article.

August 2, 2017 - Last month, we questioned whether June’s technical dislocation in the loan market, which ended its 15-month positive return streak, might have represented the buying opportunity of 2017.  Turns out, it might have: the S&P/LSTA Leveraged Loan Index (LLI) posted a 0.69% gain in July – the best monthly return this year.  July’s market value return came in at 0.28%, the LLI’s first positive reading since April.  Furthermore, July represented the first time market value returns were positive for Single B (0.28%) and Double B (0.29%) rated loans since February.  In total, loans have now returned 2.62% – slightly behind most estimates as market value returns remained in the red on the year. 

July 27, 2017 - In the LSTA Newsletter last week, we recapped the efforts taking place to (potentially) replace LIBOR. This week, a speech by Andrew Bailey, Chief Executive of the U.K.’s Financial Conduct Authority (FCA), in which he said the FCA would not compel banks to submit to LIBOR after 2021, has the market buzzing about the impending demise of LIBOR.  Bloomberg reported that LIBOR was headed for the trash heap of history, the FT reported that LIBOR was no longer fit for purpose and the WSJ offered a “Eulogy for the World’s Most Important Number”.

July 27, 2017 - Lately there has been much discussion about excess demand from investors. But what, exactly, is the state of investors? Below, we recap recent news about CLOs, loan mutual funds and direct lenders.

July 27, 2017 - U.S. secondary loan trading volumes totaled $162.5 billion during the second quarter.  While that marked a 9% reduction over first quarter’s record reading of $179 billion, it still came in as the fourth highest quarter in history.  In total, first half trading activity was up 12% over the same time last year.  Furthermore, 2017’s surge in volumes has pushed the market’s 12-month turnover ratio back above 70% (to 72%, to be exact) after registering a multi-year low of 68% across 2016.

July 27, 2017 - Defaults remain benign and technicals – despite flipping around quarter end – remain rather supportive of issuers. Is it any wonder, then, that loan terms continue to soften? We review such trends below. 

July 20, 2017 - In June, the Alternative Reference Rates Committee (“ARRC”) – a group set up to develop potential new interest rate benchmarks – announced that a broad Treasuries repo financing rate was selected as the new preferred alternative reference rate for LIBOR. Following that announcement, Reuters and Business Insider reported that the new benchmark could replace LIBOR. And, following that was a flurry of calls to the LSTA asking whether LIBOR is going away.

July 18, 2017 - Over the past two weeks there have been two important developments related to the reauthorization of the National Flood Insurance Program (“NFIP”) which runs out on September 30, 2017.  First, the Senate Banking Committee published the text of a bipartisan reauthorization bill.  Unfortunately, unlike reauthorization bills that passed through the House Financial Services Committee (“HFSC”) in May (discussed in our May 18th post), the Senate bill would not reverse a burdensome provision in the NFIP that requires banks to ensure that real property collateral securing a commercial loan that is located in a federally designated flood zone be adequately insured.

July 17, 2017 - Last week, the LSTA filed its Reply Brief in its lawsuit against the Federal Reserve Board and the Securities and Exchange Commission on the issue of the application to CLO managers of the Dodd-Frank risk retention rules.  The Reply Brief is available here.  As we noted in April, the SEC, Fed, FDIC and OCC, in October 2014 finalized risk retention rules under Section 941 of Dodd-Frank that imposed on CLO managers the requirement to purchase and retain 5% of the fair value of any CLO they initiate.

July 13, 2017 - It may be shaping up to be a rather strong year for CLOs.  After a dismal January, U.S. CLO formation moved at a solid clip in first and early second quarter. Then, in June, the pace accelerated to a sprint. While it’s not clear this pace will continue, CLO analysts have ratcheted up their 2017 issuance forecasts. We discuss these trends – and their facilitators – below.

July 12, 2017 -  The staff of the Securities and Exchange Commission has recently taken the position that registered investment advisers that trade loans and other assets (including derivatives) on behalf of separately managed accounts that do not settle "delivery versus payment” ("DVP"), have “custody” of client assets under the Investment Advisers Act (the “Act”) and therefore must comply with the requirements of the custody rule.  (The custody rules do not apply to trades on behalf of CLOs or mutual funds).  This week the LSTA hosted a webinar that focused on this surprising regulatory development which could have very costly consequences. 

July 11, 2017 - The loan market’s 15-month positive total return streak finally came to an end in June as the S&P/LSTA Leveraged Loan Index (LLI) posted a negative 0.04% return.  June’s negative 0.43% market value (MV) loss was the most severe since February 2016, which, not coincidently, marked the last time the LLI found itself in the red.  Across the second quarter, loans returned 0.76%, following first quarter’s 1.15%.  And at 1.91% through the first half, loan returns now trail each of the other major asset classes.  It truly has been a coupon-clipping year so far in 2017 as bid levels have fallen six bps since year-end (four bps off their low but 60 bps off their early March high).  That said, it has been rough sledding in the secondary this year, and more so lately, as MV returns have been negative for two months running and three times since March.

July 6, 2017 - 2Q17 headline leveraged lending volumes remained astonishingly high. But, of course, the real story is more nuanced. As in recent quarters, refinancings dominated the action, real supply was more modest and demand remained very solid.  We discuss all these trends – and what they meant for deal terms – below.

July 5, 2017 - Last Thursday, the LSTA hosted Stephen Obie, Partner, Jones Day, and Dzmitry Maroz, Senior Manager, Deloitte Advisory, for a webcast, “Level Two: What Might Blockchain Mean for Syndicated Loans”.  Building off their first presentation, the speakers took a closer look at blockchain technology as it applies to syndicated loans.  Many first order problems facing industry efficiency – long trade settlement times, low automation and manual reconciliation – can be addressed with this technology.  One single source of truth which can be shared with participants would result in time and cost savings.

July 5, 2017 - The sound you may be hearing is CLO managers’ and underwriters’ collective sigh of relief.  As detailed in a Cadwalader’s very comprehensive memo, three European Union legislative institutions have agreed on compromise amendments to proposed EU rules for “simple, transparent and standardized” (“STS”) securitization (the “Securitization Regulation”).  They have also reached agreement to proposed regulations impacting the Capital Requirements Regulation (“CRR”).

June 29, 2017 - June might have been the tale of two months. While early June was relatively benign, problems in the oil patch and retail reasserted themselves in latter part of the month. Nevertheless, loan managers forecast modest defaults in the coming year. After that, well, time will tell. We discuss all below.

June 29, 2017 - After years of regulatory barrage – which often inadvertently hit the leveraged loan market – the situation may have stabilized. In fact, we may even be heading to the point where reasonable FinReg fixes could be in the offing.  And, perhaps surprisingly, regulatory refinements may be most likely to come from the regulators themselves. In January, President Trump signed an executive order (“EO”) laying out his core regulatory principles and requiring the Treasury to prepare reports identifying regulations that did not correspond to the core principles (and that were ripe for fixes).

June 29, 2017 - On Wednesday, June 20th and Thursday, June 21st, Mike Bellucci and Jerome McCluskey, partners at Milbank Tweed presented the Complete Credit Agreement Teach-In to a sold out crowd. Based on the 2nd edition of the LSTA’s Complete Credit Agreement Guide, (which was written by Mike and Jerome), the Teach-In covered topics such as Different Credit Facilities, Repayment and Yield, Representations and Warranties, Covenants and Events of Defaults.

June 28, 2017 - The staff of the Securities and Exchange Commission has recently taken the position that registered investment advisers that trade loans and other assets (including derivatives) that do not settle "delivery versus payment” ("DVP"), have custody of client assets under the Investment Advisers Act and therefore must comply with the requirements of the custody rule.  While the Adviser’s Act custody rules do not apply to trades on behalf of CLOs or mutual funds, they do apply to trades on behalf of separately managed accounts or comingled accounts.  The SEC's attribution of custody to these assets would require registered advisers to hire auditors to conduct annual surprise audits.

June 26, 2017This week the LSTA distributed to the members of its MNPI Working Group a revised draft of its Code of Conduct (“Code”) which incorporates the LSTA’s old Principles for the Communication and Use of Confidential Information in the Loan Market (“Principles”).  The Working Group is headed by LSTA General Counsel Elliot Ganz and LSTA Associate General Counsel Tess Virmani.   

June 26, 2017, New York, NY – In observance of Independence Day, the Loan Syndications and Trading Association (LSTA) recommends treating Tuesday, July 4, 2017 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

June 22, 2017 - This week the House Committee on Financial Services took the first step in a process that could reverse an obscure and burdensome provision of a law that requires banks to ensure that real property collateral be insured under the National Flood Insurance Program (“NFIP”).  The law requires federally regulated lenders to determine whether improved real property collateral securing a loan is located in an area designated by the FEMA as being subject to special flood hazards (“SFHA”), and, if so, to ensure that adequate flood insurance covers the structure.

June 22, 2017 - It has been a cool start to summer for issuers.  The secondary market continued to soften, several loan and HY bond deals have been pulled, and several others have seen terms move in favor of investors. That said, it’s a little early to suggest the market is turning away from issuers. Moreover, in recent months we seen several instances when technicals turned (briefly) in favor of investors, only to return to their issuer-friendly ways in a matter of days. Only time will tell whether the summer solstice ushered in a more permanent shift.

June 21, 2017On Tuesday, the LSTA hosted a webcast presentation, “It’s Always Better to Be Direct: A Guide to Direct Lending” presented by Latham & Watkins partners Andrew Fayé and Jane Summers.  Middle market lending has traditionally been primarily through balance sheet banks, but in recent years, direct lenders have evolved from participants in club deals to leading deals for top tier sponsors.  Unlike banks many direct lenders are unregulated and, at the very least, direct lenders are not affected by the Leveraged Lending Guidance.  The direct lender’s business model is also different from that of arranging banks – the direct lender is relying on returns from the loan itself rather than fee income.

June 19, 2017 - U.S. secondary loan trading volumes increased 18% during May to $57.6 billion after falling to a five-month low in April.   And after a very busy May (the second busiest month in two years, the first being March 2017), trading volumes have totaled $631 billion over the last twelve months. This is a remarkable $23 billion higher than 2014’s record of $608 billion.  This recent surge in volumes has pushed the market’s 12-month turnover ratio back above 70% (to 72%, to be exact) after registering a multi-year low of 68% across 2016.

June 14, 2017Recently, two important financial regulatory reform efforts were launched, each of which was large in scope and could have important ramifications for the loan market and beyond.  As reported by the Wall Street Journal, on June 7th, the House of Representatives passed the CHOICE Act, a sweeping bill that would repeal much of the 2010 Dodd-Frank Act. 

June 14, 2017 - S&P/LSTA Leveraged Loan Index (LLI) loan returns totaled 0.37% in May– which ran the market’s monthly positive return streak to 15.  But for the fourth time during those 15 months, market value (MV) returns were in the red – but just barely at  - 0.03%.  And unlike the other months (BREXIT, U.S. Election, Failure to Pass Healthcare Reform), there were no broader macro-events which could explain away the MV loss in May (but there was a change in loan market technicals).  

June 9, 2017 - The updated LSTA suite of trading documents were published on June 9th and govern all trades entered into on or after June 9th. Some of the modifications found in the June 9th documents include the following:

June 8, 2017 - This week, the LSTA hosted its Tokyo and Hong Kong loan investor conferences, welcoming more than 400 and 250 attendees, respectively. While the LSTA is a U.S. organization, we focused on global trends. Case in point: The kick off panel compared and contrasted the U.S. and Europe. The two geographies see many similar pressures. On the fundamental side, both regions enjoy sub-2% default rates. On the technical side, supply – as measured by the size of the U.S. and European loan indexes – has been relatively flat for several years.

June 7, 2017 - On June 7th, the Board of Governors of the Federal Reserve and the SEC filed a responsive brief in the LSTA’s ongoing lawsuit relating to risk retention for CLO Managers.  The LSTA has alleged that the agencies overstepped their authority when they determined, contrary to the statutory language, that CLO managers were “securitizers,” subject to the risk retention requirements under Section 941 of Dodd-Frank and erred by tying the required amount of first-loss horizontal risk retention to 5% of the fair value of a CLO rather than something closer to its credit risk as mandated by the statute.

June 7, 2017 - An important report published by Moody’s last week suggests that secured lenders may be more exposed to stressed retailers than has historically been the case.  The reason:  A number of retailers, like J. Crew, Neiman Marcus and Claire’s Stores, have transferred valuable assets, primarily their intellectual property such as brand names, to unrestricted subsidiaries outside their credit agreements’ reach.

June 7, 2017 - The LSTA this week, joined by the Commercial Finance Association, filed an amicus brief in a case of great importance to the loan market, In re TOUSA.  At issue is whether a bankruptcy court can violate the four corners of the bankruptcy code (in this case, in the context of a remedy for a fraudulent transfer) on the basis of the court’s “equitable powers”.  The LSTA believes the answer is no.  In 2005, TOUSA, Inc. – a national homebuilder – created a joint venture funded in part by secured loans from the “Transeastern Lenders”. 

June 1, 2017 - CLO issuance continued to trend solidly in May, approaching $10 billion in the U.S. and topping €2 billion in Europe. But while issuance continued to recover, other volume trends began to shift. For instance, Deutsche Bank tracked $6 billion of U.S. CLO refis in May, marking the first month in 2017 where refis lagged new issue volume.  All told, year-to-date U.S. CLO issuance has hit $37 billion, up 91% over the same (anemic) period in 2016, but down 20% from 2015 levels.

June 1, 2017 - Following a record-breaking first quarter ($179 billion), U.S. secondary loan trading volumes eased in April to just $48.9 billion.  April’s tally was off 26% month over month and 18% lower than first quarter’s monthly average.   That said, trading volumes have totaled $623 billion over the last twelve months, - $15 billion higher than 2014’s full year record of $608 billion.  In turn, the market’s 12-month tur ratio increased back above 70% after registering a multi-year low of 68% last year.

June, 1, 2017While U.S. CLO managers are working to adapt to the 5% risk retention requirement, European CLO managers breathed a sigh of relief when it became clear that their own risk retention levels would remain at 5% and not climb higher (at least for now). Below, we discuss the details.

May 30, 2017 - On Friday, May 26, 2017, LSTA EVP Meredith Coffey and general counsel Elliot Ganz met with Craig Phillips, Counselor to Secretary of the Treasury Steven Mnuchin to discuss a number of regulatory issues impacting the loan market.  The meeting was connected to an Executive Order on Core Principles for Regulating the United States Financial System (the “EO”) issued by president Trump early in February that enumerates “core principles” by which the administration will be guided in regulating the U.S. financial system.  Most relevant to the loan market is a provision to “make regulation efficient, effective, and appropriately tailored.”

May 25, 2017 - On May 23rd, the LSTA and LMA hosted the 9th Annual Joint LSTA and LMA Conference in NYC.  After BNP Paribas senior economist, Bricklin Dwyer, presented the Global Outlook,  the panels focused on a cross-border comparison of the latest deal term trends of the US and European primary markets, discussed recent US and UK secondary market developments, reviewed the latest US and European regulatory initiatives, including the ECB’s May 16th publication of its final guidance on leveraged transactions, and looked at the UK’s Scheme of Arrangement and what its future may be given the UK’s proposed withdrawal from the EU in 2019 and highlighted key restructuring issues for US lenders to consider when lending to a European borrower.

May 23, 2017 - The LSTA published new LSTA Latin American Trading Documents. Building on last year’s release of the LSTA Model Credit Agreement Provisions for Latin American Cross Border Transactions, the LSTA LatAm Working Group tackled the next step of standardising LSTA Latin American trade documents. The group worked with local counsel in Chile, Colombia, and Peru to include appropriate language for our trading documents which are specifically designed for trading New York law governed loans made to Latin American borrowers located in one of those jurisdictions.

May 23, 2017 - The Government Accountability Office is determining whether the Leveraged Lending Guidance is a “Rule” under the Congressional Review Act, subject to invalidation by Congress.  What does this all mean?  Sidley Austin answers your questions in the Q&A attached below.

May 18, 2017 - The question “How will President Trump change lending?” has been on our minds lately – and this week was no different, as we (along with Sidley Austin partners) discussed “The (Loan) World According to Trump”. What was different this week was that, in addition to our usual political analysis, we also dissected several devils in several details. First, as discussed below, we analyzed the interplay between Leveraged Lending Guidance and actual leveraged lending practices. Second, in a nearby article, we examine the misery that is flood insurance (and suggest there may be a solution). 

May 18, 2017 - An obscure and burdensome rule that requires banks to ensure that real property collateral be insured under the National Flood Insurance Program (“NFIP”) may be going down the drain.  The rule requires federally regulated lenders to determine whether improved real property collateral securing a loan is located in an area designated by the Federal Emergency Management Agency (“FEMA”) as being subject to special flood hazards (“SFHA”), and, if so, to ensure that adequate flood insurance covers the structure.  The obligations on the banks kick in through a number of “tripwire events” such as making, increasing, renewing or extending a loan (perhaps appropriately called “MIRE”).   (See slide 29 of The (Loan) World).

May 18, 2017 - In response to the strong recovery of the European leveraged finance market and the rise of borrower-friendly conditions that have been imported into the European market, the European Central Bank released its final guidance on leveraged transactions on May 16th.  Approximately six months in the making, the guidance comes after a public consultation period on the draft guidance from which many, but not all, industry comments were accepted.

May 17, 2017 - On Tuesday, the LSTA hosted a CLE presentation by Haynes & Boone, Is There Light at the End of the Tunnel for Oil & Gas Companies? Unlike the last two years which saw one of the deepest dives in the U.S. oil & gas industry, 2017 seems brighter.  Oil prices have stabilized at about $50 per barrel and, moreover, oil & gas companies have cut their operating expenses in half permitting profitability at oil prices where they might not have broken even before the recent oil price crash.  Further good news is that the crude market is currently in deficit and demand is set to outpace production through the end of 2017. 

May 16, 2017 - We will not be publishing the revised LSTA trading documents this Thursday, May 18th, and instead will plan to publish them on Friday, June 9th. While there is still a chance that the Department of Labor's Fiduciary Rule will be further delayed or amended, at this moment, the Fiduciary Rule will take effect on Friday, June 9th.

May 15, 2017 - On Wednesday, May 10th, LSTA Deputy General Counsel, Bridget Marsh, and LSTA Associate General Counsel, Tess Virmani, joined Arleen Nand, partner of DLA Piper, in Minneapolis to present on the LSTA’s Model Credit Agreement Provisions to members of the Minnesota Bar Association (MBA).  The LSTA was invited to present as part of the MBA’s new series of lectures on commercial finance.

May 11, 2017 - Last week the LSTA joined The Clearing House and the American Bankers Association to file amicus briefs in two related cases that have been initiated by the State of Colorado against two marketplace lenders, Avant and Marlette, each of whom have bank partners.  These cases raise the same important principle, whether a loan that was valid when made is valid in the hands of a buyer.

May 11, 2017This week the LSTA hosted the fifth installment of our quarterly roundup of Recent Developments in Bankruptcy Law.  Rich Levin of Jenner & Block once again focused on a number of recent key cases for loan market participants.  The most important issue covered was the recent Supreme Court decision in In re Jevic where the Court ruled that non-consensual structured dismissals that distributed an estate’s property in violation of the absolute priority rule are prohibited.

May 9, 2017 - The Donald Trump Presidency hit its ballyhooed 100-day mark on April 29th. To commemorate the occasion, the LSTA hosted a CLE Webcast on May 4th to discuss what has – and hasn’t – changed. Below we discuss key insights from the segment, which included i) means by which regulation can change, ii) what specifically might be happening to Leveraged Lending Guidance, and iii) how the “avenues” for regulatory change can be navigated to help fix risk retention.

May 3, 2017 - S&P/LSTA Leveraged Loan Index (LLI) April loan returns totaled 0.44% – which ran the market’s monthly positive return streak to 14.  Better yet, market value (MV) returns were back in the black at a 0.06% after running negative for the first time in four months during March.  Sector wise, retail (+0.36%) finally put their five month negative return streak to rest in April, but its MV returns did in fact remain in the red for the seventh consecutive month.  On the downside, the Utility sector was the lone negative drag on the broader market, at -0.08%.  At 1.6%, year-to-date, loan returns trail the other major asset classes, including Investment Grade (+2.4%) and High-Yield bonds (+3.9%).

May 3, 2017 - Is the loan market regaining (some) balance?  Demand appeared marginally less rapacious, and supply was marginally more plentiful in April. Real new issuance, courtesy of large new-money deals like Micro Focus, Misys and Tempo Acquisition, brought real paper to the market, reported LevFinInsights. Indeed, net of repayments, outstandings in the S&P/LSTA Leveraged Loan Index increased by more than $9.5 billion, to $890 billion, by the end of April.

April 27, 2017 - Today the LSTA announced that Executive Director Bram Smith informed the organization that he would retire at year end. He will continue in his role until that time. Smith, a 40-year veteran of the US loan market, has led the LSTA since September 2008.

April 27, 2017 - The LSTA hosted a CLE webcast “A Blockchain Primer: Separating Hype from Reality” presented by Stephen Obie, partner, Jones Day, and Dzmitry Maroz, Senior Manager, Deloitte Advisory.  As the speakers explained, blockchain, which is a distributed ledger technology, is an exciting technology that will likely transform the financial services industry as well as many others.  Cautious optimism is the name of the game, however.

April 27, 2017 - The LSTA is delighted to announce that the 2017 edition of The International Comparative Legal Guide to: Lending & Secured Finance, published by Global Legal Group is now live and available on our website for LSTA members under "Events and Education - LSTA Publications". The Guide offers practical cross-border insight into lending and secured finance in 41 countries and is divided into two main sections.

April 25, 2017 - The LSTA has published exposure drafts of the LSTA's new LatAm Trading Documents. After publishing the LSTA Model Credit Agreement Provisions for Latin American Cross Border Transactions ("LatAm MCAPs") in 2016, the LSTA LatAm Working Group tackled the next step of standardising LSTA Latin American trade documents.

April 24, 2017 - U.S. secondary loan trading volumes increased 21% to $178.7 billion during the first quarter.  The previous record high was established back during 2Q14 at $168.8 billion.  First quarter’s tally represented a 22% increase over the same period last year and raised the market’s turn-over ratio to 72% over the last twelve months (compared to full-year 2016’s 68% figure).  While quarterly distressed trading volumes remained flat in the $11 billion range, it was par activity ($168 billion) that drove total volumes higher, according to the LSTA 1st Quarter Trade Data Study.

April 24, 2017 - Last week, Congressman Jeb Hensarling (D, TX), Chairman of the House Committee on Financial Services, introduced the CHOICE Act, a sweeping bill that would repeal much of the equally sweeping 2010 Dodd-Frank Act. Importantly for the loan and CLO markets, among the provisions that would be repealed would be the risk retention rules for CLO managers (and everyone other asset class other than residential mortgages) and the Volcker Rule restrictions on banks that prevent them from owning the debt securities of CLOs that hold anything other than loans.

April 24, 2017 - The LSTA is pleased to announce the five winners of our 2017 Loan Operations Conference Survey Raffle.  Each of the five lucky winners, out of more than 100 survey respondents, has won a $100 Amazon Gift Card. 

April 21, 2017 - The LSTA on Wednesday, April 19th, filed its opening brief with the DC Circuit Court in the final stage of its ongoing lawsuit against the Federal Reserve and SEC on the issue of CLO risk retention

April 21, 2017 - On April 20th the LSTA distributed Exposure Drafts of the following trading documents: (i) Par Confirm Standard Terms and Conditions, (ii) Distressed Confirm, (iii) Distressed Confirm Standard Terms and Conditions, (iv) Purchase and Sale Agreement Transaction Specific Terms, (v) Purchase and Sale Agreement Standard Terms, (vi) Par Participation Agreement Standard Terms (vii) Distressed Participation Agreement Standard Terms, (viii) Proceeds Letter and (ix) Short Form Proceeds Letter. These drafts have been vetted by the Trade Practices and Forms Committee.

April 20, 2017 - Recent statistics suggest both a flattening and a substantial increase in leverage in the last quarter. While that does not seem possible, when one teases through the data, it appears that – like the famous cat – both states may exist simultaneously.  We drill down below.

April 18, 2017 - Could there be legislative help on the risk retention front? Perhaps. But as market participants have learned, it is easy to have one’s hopes raised – and even easier to see them dashed. Below we discuss the opening offered by the Senate Banking Committee, and the LSTA’s response.

April 13, 2017, New York, NY – In observance of Good Friday in the United States, the Loan Syndications and Trading Association (LSTA) recommends treating Friday, April 14, 2017 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

April 12, 2017 - There has been considerable discussion about the loosening of loan terms in the past year, but it’s not always easy to find specifics. On April 6th Tess Virmani (LSTA) moderated the Current State of the Syndicated Loan Market CLE at the ABA Business Law Section’s Spring Meeting in New Orleans, which offered these much needed specifics on deal term trends and recent legal developments in the large cap and middle markets.

April 10, 2017In response to an Executive Order issued by President Trump in February, on April 7, 2017, the LSTA submitted an important letter to Secretary of the Treasury Steven Mnuchin suggesting the elimination or modification of the risk retention rules as applied to CLO managers.

April 6, 2017 - Most years start off with more demand than supply. 2017 was no different in style, but was rather larger in scope.   ThomsonReuters LPC, S&P/LCD and LevFinInsights (LFI) all documented a primary loan market that was awash with liquidity – and thus inundated with repricings, reverse flex, falling spreads and softening structures. So, business as usual.

April 6, 2017 - On Tuesday, the LSTA hosted 430 attendees at its annual Operations and Settlement Conference. The message? There have been significant wins in the past year – thanks to Delayed Comp, settlement times are down – but there’s a long way to go. We recap key findings below and offer the presentations here.

April 6, 2017 - In case you missed it, there is potentially momentous – if Washington-centric – news on Leveraged Lending Guidance. Last Friday, Senator Toomey (R-PA) sent a letter to the Government Accountability Office (GAO) asking whether the Leveraged Lending Guidance actually was a “rule” in guidance’s clothing, Politico Pro and American Banker reported. Why does this matter? It could, theoretically, mean that Leveraged Lending Guidance is changed – or even goes away.

April 4, 2017 - While March’s 0.08% total return marked the 13th consecutive positive return for the S&P/LSTA Leveraged Loan Index, the market value component of return ran negative for the first time since November.  But even still, loan returns bested all other asset classes with the exception of equities during a challenging March, as the major fixed income markets ran in the red.  On the quarter though, loan returns, at 1.15%, have only topped 10-year Treasuries.

April 3, 2017 - On March 27th, the LSTA hosted a webinar on the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities held with an Intermediary presented by experts, Sandra Rocks of Cleary, Edwin Smith of Morgan Lewis, and Steve Weise of Proskauer Rose.  As of April 1, 2017, the US became one of three countries bound by the Hague Securities Convention (only Mauritius and Switzerland are also now similarly bound); however, other countries are expected to follow suit and ratify the Convention in the coming months.

March 30, 2017 - Bloomberg observed an interesting phenomenon this week: The Fed’s Commercial and Industrial (C&I) lending stats dropped sharply recently – and no one knows why. Below, we discuss Bloomberg’s findings, contrast them with today’s leveraged loan market, and hazard a guess about what tomorrow might bring.

March 30, 2017The LSTA – and most of our members – are intensely focused on improving loan settlement times. Next week, we are looking to get the community together and engaged for the next big push: Primary Delayed Comp. We are so dedicated to forward progress that we are offering attendees one free ticket for every one they buy. And, in fact, with over 400 people registered, the LSTA’s upcoming Operations and Settlement Conference on April 4th is on target to be the largest loan ops conference in the world.

March 28, 2017 - Last week, in In re Jevic, the U.S. Supreme Court reaffirmed the most fundamental principle in bankruptcy – the absolute priority rule – while at the same time recognizing that flexibility in the bankruptcy process itself is essential.  It was a very important win for secured lenders.

March 27, 2017 - The LSTA’s own Deputy General Counsel, Bridget Marsh, will be elected to the new class of Board of Regents at the Annual Meeting of the American College of Commercial Finance Lawyers in New Orleans on April 8th.

March 23, 2017 - On Wednesday, Bloomberg, WSJ and LCD – and nearly every other news outlet – warned that Sears had added “going concern” language to its latest filing with the SEC. On the news, Sears’ stock fell 12%.

March 23, 2017 - Yesterday, in In re Jevic, a case of enormous importance to the loan market, the U.S. Supreme Court ruled 6-2 that non-consensual “structured dismissals” that distribute estate assets in violation of the “absolute priority rule” are not permitted under the bankruptcy code.  The decision underscores the importance of the absolute priority rule as a bedrock principle of U.S. bankruptcy, a principle that is at the heart of secured lending.

March 23, 2017 - Yesterday, there were two pieces of news on the settlement side. First, the SEC voted to adopt T+2 settlement for securities. Second, the January Effect on loan settlement times dissipated in February, returning us to the more typical times we have seen since the new delayed comp regime was implemented. (Of course, loan settlement times remain considerably wider than T+2, but the industry continues to work on tightening these times.) Below, we discuss both market and settlement trends in February.

March 20, 2017 - Over the past year, a once obscure issue took on huge significance in the oil patch.  To wit, do gas-gathering contracts between “midstream” service companies and production companies (E&Ps) constitute real property interests?  As Reed Smith notes in a recent client memo, a “gathering agreement refers to a contract that provides for collecting gas or other commodities at the point of production, and for moving it through a pipeline system to a junction with a pipeline’s primary transmission system”.

March 16, 2017 - Washington and Wall Street have been pondering tax reform plans – and now borrowers are doing so as well. Both the Trump and House Republican plans significantly reduce companies’ ability to deduct interest. For the loan market, there are (at least) two important impacts to consider. First, the impact on the companies themselves – i.e., whether the reforms make the companies more creditworthy. Second, how potential tax reforms impact companies’ demand for debt. Below, we review recent analysis on the impact of Trump and House Republican tax plans on U.S. companies, as well as how one company is preempting the issue.

March 16, 2017 - On March 15th the LSTA hosted a webinar on Bankruptcy and Litigation Claims presented by Justin Brass of Burford Capital and John Mills and Timothy Bennett of Seyfarth Shaw.  Trading in claims in bankruptcy cases is simply cashing out at a substantial discount  a creditor who cannot, or does not have the patience to, await a promised payout from a bankruptcy case.  Most opportunities for sourcing those claims arise in the Southern District of New York and Delaware; however, given last year’s turmoil in the oil & gas industry, there has been an increase in the number of related claims opportunities  in Texas.

March 15, 2017 - If cocktail hour chatter qualifies as insightful feedback, the buzz following the LSTA/LMA Secondary Market Seminar last week suggests that participants in the European, Middle East and African markets (“EMEA”) are not entirely against implementing delayed comp for secondary trades, at least for some jurisdictions.   And that should not be surprising.   While the settlement numbers in the U.S. still have much room for improvement, the story in EMEA is significantly more challenging.

March 13, 2017 - Are quick asset sales to resolve bankruptcy a good or bad thing? The issue of whether Section 363 of the bankruptcy code, the section that permits quick asset sales, is in need of reform was first raised by the American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11 (the “Commission”).  In its 2014 report the Commission pointed to the increased use of 363 sales and the increasingly fast pace at which they have been completed, and concluded (based on anecdotal evidence) that these two factors lead to systemic undervaluation of companies to the detriment of junior creditors.

March 9, 2017 - After breaking records (and investors’ hearts) in January, the leveraged loan market settled somewhat in February. In turn, the rapid spread deterioration – or improvement, depending on one’s world view – slowed. Below, we run through the numbers that defined February.

March 8, 2017 - Despite intermittent bouts of volatility (due in part to Brexit and the US election), the US and European loan markets returned 10.2% and 6% respectively in 2016, with both figures representing three-year highs. A combination of strong technicals and a risk-on rally in the secondary market have lifted bid levels to multiyear highs as the percentage of loans trading above par has now risen to almost 70%. In turn both markets have experienced record levels of refinancing activity which has driven new issue yields much lower. 

March 8, 2017 - This week, LSTA General Counsel Elliot Ganz to Israel to participate for the first time in the DC Finance conference for institutional investors in Tel Aviv.  Elliot was joined by Jeff Bakalar of Voya, Brian Yorke of Halcyon, and Michael Friedman of Chapman for a panel on “Investing in U.S. Institutional Corporate Loans”.   Reflecting the relative unfamiliarity of many Israeli institutional investors with the U.S. loan market, the panel first made clear what the loan market is not, e.g. real estate loans, direct lending or loans to banks.

March 6, 2017 - So far in 2017, the new normal for loan returns seems to be coupon plus around 15 bps.  After delivering a 0.56% return in January, the S&P/LSTA Leveraged Loan Index returned 0.5% in February (which marked the twelfth consecutive positive monthly return).  That said, at 1.06% on the year, loan returns currently trail each of the major asset classes except 10-year treasuries.  Across the secondary loan market, Mark-to-Market (MTM) average bid levels increased 17 bps to 98.38 in February, with MTM bid-ask spreads range-bound in a low 80 bps context. 

March 2, 2017 - The potential of blockchain was an overriding theme at SFIG Vegas this week. While blockchain is slated to solve everything but the common cold, it was noteworthy that – even in a large, multi-asset securitization conference – syndicated loans were flagged as a particularly compelling use case.

March 1, 2017 - SFIG Vegas, the major West Coast securitization conference, had a different – and much happier – tone this year.  This change was detailed in a Leveraged Loans and CLO Outlook Panel moderated by LSTA EVP Meredith Coffey. For instance, during last year’s conference, the average secondary loan bid was sitting below 90 cents on the dollar and the average all-in spread on new B+/B term loans was over LIB+620. Fast forward to today and secondary loan prices have rallied nearly 10 points (to the 98 context) and new issue B+/B spreads have fallen below LIB+400 – down more than 200 bps.

February 28, 2017 - Today LSTA issued a Market Advisory for Avaya (located under Market Advisories) which filed for bankruptcy on January 19, 2017. Members asked us to provide guidance on the allocation of accrued interest and adequate protection payments amongst buyers and sellers of Avaya bank debt in respect of trades entered into before and after that date.

February 28, 2017 - The LSTA is producing a series of short videos on blockchain.  In each video, Joe Dewey of Holland & Knight, who is also one of the authors of "The Blockchain: A Guide for Legal and Business Professionals", discusses this new technology and its potential impact on financial services and the loan market in particular.   This week, the second video on “smart contracts” was released.

February 23, 2017 - This week the LSTA hosted the fourth installment of our quarterly roundup of Recent Developments in Bankruptcy Law.  Rich Levin of Jenner & Block once again focused on a number of recent key cases for loan market participants.  Among the most interesting issues was the “extraterritorial” reach of the avoiding powers of Section 547 of the bankruptcy code.  

February 23, 2017 - As the institutional loan market’s excess demand continues into its eighth month, the benefits are drifting down the capital stack. To wit, after $100 billion of (primarily first-lien) repricing in January, second lien loans may be on deck. 

February 23, 2017 - January 2017 marked the second consecutive month where the median trade price was reported 25 basis points north of par.  It’s safe to say the secondary is trading at historically rich levels with 63% of activity coming in at a price above par and an additional 17% of trades being done in the 98-100 range.  And with a red-hot secondary (and record levels of refinancing activity) came a surge in liquidity.

February 21, 2017 - Many loan market participants might be surprised to discover that syndicated loans could raise antitrust and competition law issues, both at the syndication stage and during restructuring.  Yet, recent regulatory scrutiny in Europe and litigation in the United States suggests that it would be wise to be very mindful of these concerns.

February 14, 2017 - We distributed to the Primary Market Committee a draft of the new LSTA Form of Incremental Facility Amendment.  Incremental facilities may take the form of tranches of an existing facility (typically referred to under the credit agreement as an "accordion" or "increase") or tranches of an entirely new facility (typically referred to under the credit agreement as a "new incremental tranche" or similar term).

February 13, 2017 - After being dominated by refinancings in January, the CLO engine is firing on all cylinders in February. Following less than $1 billion of issuance in January, new CLO formation topped $3.2 billion in the first two weeks of February, according to LCD numbers. February refis, meanwhile, topped $5 billion through February 9th

February 13, 2017 – In observance of the Washington’s Birthday holiday, the Loan Syndications and Trading Association (LSTA) recommends treating Monday, February 20, 2017 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

February 10, 2017 - On Friday, the LSTA filed two motions with the U.S. Court of Appeals for the DC Circuit in its litigation against the SEC and the Federal Reserve (the “agencies”) on the issue of risk retention for CLO managers.  The first motion, which was joined by the government, requested the court’s approval of a proposed briefing schedule.  The second, which the government did not join but did not oppose, asks the court to expedite oral arguments after the final briefs are filed.

February 9, 2017 - While U.S. lenders – and borrowers – wonder whether the financial regulatory system may quickly ease under President Trump, the reality is that regulatory changes may take time to come to fruition, as noted here and here last week.  At the same time that U.S. participants hope for easing, European lenders may fear the imposition of greater restrictions.

February 9, 2017The Loan Syndications and Trading Association is producing a series of short videos on blockchain, also known as distributed ledger technology.  In each video, the LSTA’s Deputy General Counsel, Bridget Marsh, interviews Joe Dewey, partner of Holland & Knight, and one of the authors of “The Blockchain: A Guide for Legal and Business Professionals”.

February 8, 2017 - This week a new LSTA working group met to launch an important and timely new project to review and update the LSTA’s Code of Conduct (the “Code”) and its Statement of Principles for the Communication and Use of Confidential Information in the Loan Market (the “Principles”).  The project is critical because the Code and the Principles are no less than fundamental bedrocks of the industry.

February 7, 2017 - On Tuesday, LSTA Deputy General Counsel, Bridget Marsh, participated on a panel on “Canadian and US Syndicated Lending” at the Ontario Bar Association Institute in Toronto.  The panel, moderated by Hank White of Thomson Reuters, also included Martin Racicot of Fasken Martineau, and focused on the differences between syndicated lending practices in both jurisdictions.

February 6, 2017 - LSTA updated its library of regulatory guidance with a revised version of the “LSTA Guidance Regarding U.S. Sanctions Issues in Lending Transactions” and the “LSTA Guidance: Anti-Corruption Issues in Lending Transactions”.  Sanctions and anti-corruption law compliance continues to be of paramount importance to bank lenders.

February 6, 2017 - January began where December left off – with a full-fledged technical imbalance leading to rapid-fire repricings, a dividend recap binge and rapidly compressing primary spreads. Of course, December and January weren’t identical. First, the sources of demand were very different and, second, as discussed in the Secondary Review, the secondary market eased the throttle on its rapid run-up. (Coincidentally, LSTA EVP Meredith Coffey discussed these trends last week at Allied Irish Bank; the presentation is available here.)

February 3, 2017 - While the January loan market headlines read record levels of refinancing activity, the secondary market quietly produced an 11th consecutive positive monthly return.  That said, month-end price levels were in fact off their mid-January highs (and a bit softer over the past three days alongside jittery capital markets).

February 2, 2017 - The election of Donald Trump has many members asking whether there will be legislative fixes to ease the regulatory burden on the loan market, with a particular focus on risk retention and leveraged lending guidance.  In fact, it may take a while for either of those issues to change materially for the loan market. But we also would note that there’s another issue that bears watching: Tax Reform. 

February 1, 2017 - On Wednesday, LSTA General Counsel participated on a panel on “Financial Regulation: Impact and Future Changes” at the Commercial Finance Association’s 2017 Asset-Based Capital Conference in Las Vegas.  The panel, moderated by Jeff Wacker of TD Bank, also included Bill Sweet of Skadden and Kathy Dick of Promontory, and focused on the prospects for regulatory and legislative change under the new Trump administration.

February 1, 2017 - This draft form is a complete credit agreement which includes the LSTA Model Credit Agreement Provisions for Investment Grade Revolving Credit Financings circulated last month. We plan to finalise and maintain both forms.

January 27, 2017 - Clearly there is a substantive difference in Trade and Settlement Liquidity in the loan market, and not just by definition but also in measurement certainty.  Trade Liquidity is often defined as the ability, or speed to which an asset can be bought or sold at a fair price (with little or no price movement).

January 26, 2017 - The LSTA’s big story of 2016 centered on the new Delayed Compensation Standard that went live in September.  So in this review, the Market Data and Analysis team wanted to spend all our time on settlement metrics which, after four months of data, look much improved. (Kudos to all those who’ve borne the brunt of change!)  But first, let’s put today’s figures in historical perspective.

January 25, 2017 - In the past year the LSTA weighed in as amicus curiae (friend of the court) in four cases of enormous importance to the loan market.  Happily, the results in the two cases decided so far have been decidedly good.  The two other cases have been fully briefed and argued and await decision in the next few months. The cases are recapped below.

January 24, 2017 - One of the LSTA’s great achievements in 2016 was the publication of the fully revised and updated second edition of The LSTA's Complete Credit Agreement Guide.  The first edition, published in 2009, has been a go-to resource for many loan market participants. But, as the second edition’s authors, Michael Bellucci and Jerome McCluskey, partners at Milbank, Tweed, Hadley & McCloy, note, “the debt markets have seen a lifetime’s worth of turmoil” in those past seven years.

January 23, 2017 - 2016 started where 2015 left off: With a great deal of work to be done on the regulatory front! And this year is shaping up the same way.  Below, we recap several of last year’s efforts and flag initiatives that continue into 2017.

January 19, 2017 - On Wednesday, the LSTA hosted its Annual Membership Meeting. In years past, Executive Director Bram Smith’s address included inspirational rhetoric, including “Decide!”, “We shall go to the moon!”, and “The Tipping Point”. This year’s theme was a bit more down to earth: “Try Not to S**k”.

January 18, 2017 - At its Annual Meeting in New York today, members of the Loan Syndications and Trading Association elected four new board members to its 24-member Board of Directors. Brian Callahan of Bank of America Merrill Lynch was elected as the Association’s Chair.

January 13, 2017, New York, NY – In observance of the Birthday of Martin Luther King, Jr. holiday, the Loan Syndications and Trading Association (LSTA) recommends treating Monday, January 16, 2017 as a loan market holiday for purposes of calculating delayed compensation under the LSTA standard forms of trade confirmation.

January 4, 2017 - What a difference a year makes.  In 2015, contagion spread across the fixed income markets as the price of oil plummeted and global economies weakened.  As a result, S&P/LSTA Leveraged Loan Index (LLI) returns ran negative, at 0.69%, for just the second time in the LLI’s 20-year history. (The other time, of course, was 2008.)   Fast forward to 2016, where risk assets and commodities rallied which subsequently lifted loan returns above 10% for only the third time in the past 20 years.

January 3, 2017 - The loan market saw a rocky start in 2016, with secondary prices tumbling and primary spreads jumping in the first two months. But by the end of 2016, first quarter turmoil was a distant memory.

December 22, 2016 - The District Court for the District of Columbia issued a ruling denying the LSTA’s claims against the SEC and the Federal Reserve in connection with their ruling on risk retention.  The LSTA is currently weighing all its options, including appealing the decision to the DC Circuit Court of Appeals.

December 21, 2016 - LSTA is pleased to report that a case in which we filed an amicus brief, Stonehill v. Bank of the West, the Court of Appeals of New York, the state’s highest court, ruled unanimously in favor of Stonehill, the party we supported. 

December 6, 2016 - December 8th marked the second anniversary of the publication of the report (the Report) by the American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11 (the Commission). The 400-page Report was the result of a two-year project that examined all aspects of Chapter 11 and included over 200 distinct proposals.

 

December 1, 2016 - The recent 3rd Circuit ruling on the enforceability of “make-whole” provisions, while surprising to some, reinforces the importance of clear and precise drafting of loan and loan documents and indentures.  Indeed, even if one prevails, fuzzy drafting can cost millions of dollars.

November 21, 2016 - There has been much speculation over what Donald Trump's unexpected election will mean for the loan market, in particular from a regulatory perspective.  What follows is an attempt to describe the new reality and develop some educated guesses about how it could impact the regulation of loans and CLOs.

November 17, 2016On Monday the New York State Court of Appeals heard oral arguments in a case in which the LSTA filed an amicus brief because a bad decision could have serious negative ramifications for the loan trading market.  At issue in Stonehill Capital Management v. Bank of the West are whether (i) a seller at auction can withdraw a loan after it has accepted a winning bid for that loan, and (ii) an oral loan trade is enforceable so long as it identifies the material terms of the trade even if it is subject to documentation.

November 8, 2016 - On November 3rd, roughly 1,000 market participants joined us at the LSTA’s 21st Annual Conference. For folks unable to attend, we offer some key takeaways below – and note that the slides are available on the LSTA website.

November 7, 2016 - Please be advised that the new version of the LSTA's Form of Par Confirm were published today. The LSTA revised the September 1, 2016 version of the Standard Terms and Conditions for Par/Near Par Trades to clarify certain points relating to the requirements-based delayed compensation regime, noted in the blacklined version.

November 2, 2016 - The Loan Syndications and Trading Association is pleased to announce the release of the fully revised and updated second edition of The LSTA’s Complete Credit Agreement Guide

November 1, 2016 - As Phase I of the new delayed compensation standard ends and Phase II begins, the Loan Syndications and Trading Association (LSTA) is pleased to announce that well over 90 percent of all secondary par loans trades entered into on and after September 1st were compliant with the new requirements. The data demonstrates that settlement times for those trades are significantly lower and showing measurable progress towards the goal of the LSTA and loan market participants to decrease settlement times.

October 31, 2016 - Due to comments received from market participants, the LSTA revised the September 1st version of Standard Terms and Conditions for Par/Near Par Trades ("STCs") to clarify the following items noted below. The effective date of the updated STCs will be November 7, 2016. For any Par/Near Par LSTA trades entered into on or after November 1st, the current STCs shall apply until November 7th when the updated version will be in full force and effect. Notwithstanding the November 7th effective date for the updated version, the Phase II requirements take effect November 1st and such Phase II changes are built in the current effective STCs.

October 20, 2016 - U.S. secondary loan trading volumes fell 12% during the third quarter to $141 billion.  This is not a big surprise given the seasonality of third quarter activity (over the past five years, volumes, on average, fell more than 10%).  Moreover, last quarter’s $160.1 billion in activity represented a two-year high.  

October 14, 2016 - On October 13th, the SEC voted to approve their long-anticipated Open End Mutual Fund Liquidity Risk Management Rules, which have the potential of profoundly impacting loan mutual funds. The 459-page rule was published last night.  Today, we share our initial impressions. (Fair warning: we are still reading it.) For a deeper dive, we invite you the attend next Wednesday’s 4 pm ET webcast on The SEC’s Final Liquidity Rules and read a full analysis in next Friday’s Newsletter.

September 30, 2016 - The LSTA published a Market Advisory for Caesars Entertainment.  The LSTA recently learned that, with respect to the Caesars Prepetition Credit Agreement, a cash payment of $300 million will be made on a pro rata basis to first lien bank lenders on October 3rd. 

September 26, 2016 - A new issue was buzzing around the market last week: Whether the OCC would change rules that currently permit banks to invest in CLOs. Here’s the issue. On September 8th, the Fed, OCC and FDIC released a mandated report (“Section 620 Report”) to Congress and FSOC on investments that banks may engage in under current law.

September 23, 2016 - In a decision of great importance to secured lenders, the bankruptcy court in Aéropostale ruled that a secured lender could “credit bid” (i.e., use of the amount of its secured debt rather than cash as currency in a sale of the debtor’s assets) the full amount of its secured claim in a sale process commenced by a debtor pursuant to Section 363 of the U.S. Bankruptcy Code (a “363 sale”).

September 21, 2016 - Despite widespread Zika concerns - which were extensively ridiculed by Miami-based friends of your correspondent - CLO practitioners descended upon IMN’s ABS East Conference this week. A big theme? US Risk Retention. With less than 100 days left before it goes live, most speakers acknowledged that Risk Retention is the New Normal.

September 8, 2016 - LSTA releases a series of Frequently Asked Questions and Answers (FAQs) relating to the LSTA's recently implemented revised Delayed Compensation Regime.  The FAQs are divided into four categories.

September 2, 2016 - The LSTA filed an amicus brief with the Supreme Court of the United States in In re Jevic urging the court to overturn the use of structured dismissals that violate the absolute priority rule, a foundational tenant of the bankruptcy code.  This case will determine whether Chapter 11 of the Bankruptcy Code permits a bankruptcy court to approve a settlement where proceeds are distributed in disregard of the priorities established in the code without the consent of the adversely affected creditors.

September 1, 2016Reminder!  Today, September 1st, the main substantive provisions of the new protocol will go live, converting the delayed comp regime from a "no-fault" to a "requirements-based" regime.  In a nutshell, in order to receive delayed comp the buyer must generally execute the Confirmation and Assignment Agreement by T+6, select a Settlement Date of T+7 or earlier and persist until the actual Settlement Date ("Basic Requirements").

September 1, 2016 - The LSTA published new "LSTA Guidance Regarding US Sanctions Issues In Lending Transactions". The LSTA 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. Over the last half-decade, OFAC has grown more active in monitoring and enforcing US economic sanctions programs against countries, governments, and individuals.

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 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. 

August 8, 2016 - Please find a draft updated version of the LSTA Guidance Regarding US Sanctions Issues in Lending Transactions (OFAC Guidance) which reflects the latest developments in this area. Originally published in early 2014, the Guidance sets out the key OFAC (defined below) 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 5, 2016 - For nearly two years, the LSTA and its Liquidity Committee have undertaken a bold new approach to improving loan trading settlement times. For the past 18 years, delayed compensation for par/near par trades that don’t close within 7 business days of a trade has been paid on a "no-fault" basis. As the LSTA announced earlier this year, delayed compensation for par/near par trades is moving to a "requirements based" regime in order to align the interests of all trading parties and materially speed up settlement times.

August 3, 2016 - The 2016 Shared National Credit Review, published last Friday, had good news and less-good news in it. We discussed the good news in the LSTA Newsletter last Friday: In short, banks are almost entirely conforming with the Leveraged Lending Guidance when they originate loans. So, this week, we focus on the “less-good” news.

July 27, 2016 - The impact of risk retention has been mostly analyzed for two constituencies: Managers (who must raise capital to meet the risk retention rules) and borrowers (who may see a decline in credit availability or an increase in credit costs). This week, Moody’s discussed the impact on a third constituency: Investors, who may face reduced asset diversity and increased portfolio correlation. We discuss the impact below.

July 20, 2016 - In early June, we learned that the European Parliament’s Committee on Economic and Monetary Affair’s (ECON) proposed amendments to the EU’s “STS” securitization rules were, shall we say, problematic. In a nutshell, the amendments had the potential to increase risk retention to 20% and to effectively prevent US CLO managers from issuing European CLOs and from accessing the European CLO investor base.

July 18, 2016 - Three weeks after Brexit rattled the world, CLOs are back and are adjusting. Secondary spreads have tightened, primary issuance has returned and UK CLO managers are contemplating how to do risk retention compliant deals if they are no longer “European” managers.

July 12, 2016 - The LSTA announced a brief postponement of the targeted July 18th start date of the proposed new delayed compensation regime.  While much progress has been made in developing this ambitious proposal to significantly shorten secondary loan settlement times, the LSTA Board's Liquidity Committee has decided to push out the start date to ensure that we deliver an effective and workable solution. 

July 7, 2016 - With just two weeks to go before the deadline, the Board of Governors of the Federal Reserve (“FRB”) this afternoon released an order extending the conformance period for the Volcker Rule to July 21, 2017.  Although widely expected, had the FRB not acted, banks would have been forced to sell within the next two weeks any non-conforming CLO liabilities they held.

July 1, 2016 - In early June, we learned that proposed amendments to the EU’s “Simple, Transparent and Standardised (STS)” securitizations had the potential to increase risk retention to 20% and to effectively prevent US CLO managers from issuing European CLOs and from accessing the European CLO investor base. This week, we learned that Brexit might make UK-based CLO managers suffer the same fate as their American brethren.

June 29, 2016 - LSTA published a Market Advisory relating to the Final Adequate Protection Order filed in connection with the SuperMedia and Dex East bankruptcies. 

June 28, 2016 - The LSTA hosted a webinar on Brexit presented by Allen & Overy partners. Charles Borden, David Campbell, Elizabeth Leckie, and Jennifer Marshall.

June 24, 2016 - The fallout was immediate, harsh – possibly a market overreaction – and predictable. The impact when the markets opened was brutal: As the WSJ published at 4 am ET, 9 am GMT, the FTSE 100 and Stoxx Europe 600 both tumbled over 8%, the S&P futures pointed toward an opening down as much as 5%, the daily limit, Greece was down 13%, Spain and Italy were down 11%. The British pound fell as low as $1.32, a level last seen in 1985.

March 3, 2016 - On Wednesday, March 2, 2016, HR 4166 (the QCLO bill), which was sponsored by Representative Andy Barr (KY) and Representative Dave Scott (GA), was passed by the House Financial Services Committee 42-15. Notably, 10 Democrats joined the bill.

February 24, 2016 - On Wednesday, February 24, 2016, Meredith Coffey, LSTA EVP of Research, testified in favor of legislation to create a common sense solution to risk retention on behalf of the LSTA during the Capital Markets Subcommittee of the House Financial Services Committee hearing on "The Impact of Dodd-Frank and Basel III on Fixed Income Markets and Securitization". 

February 19, 2016 - On Wednesday, February 24, 2016,  the Capital Markets Subcommittee of the House Financial Services Committee is holding a hearing on "The Impact of Dodd-Frank and Basel III on Fixed Income Markets and Securitization". We are pleased to announce that Meredith Coffey, LSTA EVP of Research, will testify on behalf of the LSTA and the CLO and syndicated loan community.

February 5, 2016 - As mentioned in the LSTA Semi-Annual Review, it is anticipated that the New Delayed Compensation Standardwill become effective for secondary par trades during the second quarter of this year, pending changes to legal documentation, settlement platforms and internal operational processes.

On November 4, 2015, Federal Reserve Chairwoman Janet Yellen testified before the House Financial Services Committee and, when asked, agreed to look into whether the Federal Reserve would support the concept of a “Qualified CLO”. (A Qualified CLO is subject to tests in six categories and, assuming the CLO meets all the tests, the manager can purchase and retain 5% of the CLO equity, rather than 5% of the value of all the notes.

On January 25, 2016, an op-ed by University of Virginia Professor and Director of the McIntire Center for Financial Innovation David Smith explained the dangers of maligning leveraged loans. In his piece, Smith highlights leveraged loans as a critical source of financing for many American companies and a vital piece of the US economy.

On Wednesday, January 20, 2016 the LSTA published Know Your Customer Considerations for Syndicated Lending and Loan Trading: Guidelines for the Application of Customer Identification Programs, Foreign Correspondent Account Due Diligence, and Other Considerations ("KYC Guidelines").

On Wednesday, January 13, 2016, the Loan Syndications and Trading Association (LSTA) submitted a comment letter to the SEC in response to the proposed rule on Open-End Fund Liquidity Risk Management Programs. 

On Friday, January 8, 2016, the LSTA published the LSTA Model Credit Agreement Provisions for Latin American Cross Border Transactions ("LatAm MCAPs"). No changes were made to the Exposure Draft published last month and discussed below.

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