May 3, 2023 - The ABA held its Annual Business Law Spring Meeting in Seattle last week.   Once again, the event was hybrid allowing ABA members to participate remotely or in person.   The LSTA and our members played a prominent role in the conference’s substantive offerings.

LSTA’s EVP Tess Virmani moderated the Current Update of the Corporate Loan Market CLE which has been a fixture of the ABA conference for more than 15 years. She was joined by Christian Fundo of SVB, Scott Herrig of Davis Polk, Geoffrey Peck of Morrison & Foerster, and Clifton Prabhu of Sumitomo Mitsui Banking Corporation.  After noting the choppiness in today’s market, the panelists flagged that borrowers are, of course, seeking to retain as much flexibility as possible and ultimately the final agreed loan structure will depend on market demand.  They also compared the BSL and private credit markets, noting that although the maintenance covenant is a hallmark of private credit,  the covenant lite loan has found its way to that market, too. They then turned to recurring revenue loans and explained that these loans are made to borrowers who are not EBITDA-positive and thus rather than a structure based on EBITDA-based leverage, it is one based on a multiple of recurring revenue actually received.  The panelists also covered the Serta case and provided an update on Kirschner, LIBOR remediation, and the latest ESG considerations. 

Ms. Virmani then moderated the ABA’s Showcase Panel on the collapse of SVB bank which smashed attendance records. Panelists included former FDIC chair, Jelena McWilliams, the CFO of Western Alliance Bank, Dale Gibbons, Grant Butler and Robert Honeywell of K&L Gates, Sarah Fergusson Chambless of Fenwick & West, Doug Landy of White & Case, and Ed Smith of Morgan Lewis. The two ABA and LSTA projects were also incredibly popular topics at two subcommittee sessions.  During the Loan Documents subcommittee meeting, the Emerging Business Credit Agreement was presented by Thomas Mellor and Sean Zoltek of Morgan Lewis. They noted that the LSTA’s draft form of EBCA is intended to be used for a borrower that is an “emerging business” which captures a borrower that is no longer a new venture but is not yet an established middle market company and anticipated that our template could be useful for loans between $25 million to $100 million. They cautioned, however, that the size of the loan should not be the sole factor when deciding with which form to start.  Based on member feedback during the session, they plan to create an accompanying  supplement to the agreement so that parties can easily convert the agreement from New York Law to, for example, California law.  In addition they will build in further options so that it can more easily be drafted for an agented deal.  Finally, the draft will also provide explanatory notes with anti-tying warnings.

Tess Virmani’s new ESG and Lending Subcommittee meeting was also a hit with Tess and Christian Fundo discussing ESG ready loans and the common trend to inbed them for accessing at future date.  The Syndications and Lender Relations Subcommittee meeting chaired by Martin Racicot of Fasken, and vice chairs Maria Barclay of Practical Law and Christian Fundo held an excellent and lively session with Brian Rock of Latham presenting the updated draft form of Intercreditor Agreement.

Finally, the ADR subcommittee meeting chaired by Jeff Zaino of the AAA and Tess Virmani serving as its vice chair included an excellent interview with Leslie Berkoff who discussed the growing popularity of arbitration in commercial disputes.  She highlighted that in-person arbitration continues but that many mediations are staying virtual and on zoom.  She also discussed the process of moving from arbitration to mediation and then noted that the reverse – moving from a mediation to an arbitration – is simply not possible.

These are only a smattering of the many excellent sessions and meetings that took place during the ABA conference last week.  If you would like to join the ABA’s Commercial Finance Committee please contact Bridget Marsh.

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Membership in the LSTA offers numerous benefits and opportunities. Chief among them is the opportunity to participate in the decision making process that ultimately establishes loan market standards, develops market practices, and influences the market’s direction.

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