August 13, 2019 - As we previously noted, on May 17, 2019, the LSTA published a new suite of U.S. secondary market trading documents.  In conjunction with the rollout of the new documents the LSTA changed the Terms of Use applicable to counterparties who use those documents.  Since then, we’ve received many questions about the new Terms of Use and below we answer many of those questions.

What has changed in the Terms of Use?  The new terms require that any counterparty that trades a loan using LSTA secondary trading documents either obtain a license or become a member of the LSTA.  Previously, the Terms of Use required that at least one counterparty to a trade be a member of the LSTA.  Similarly, all other non-trading documents produced by the LSTA are subject to the new Terms of Use and are available for purchase by non-members.

Why did the LSTA change its Terms of Use? The LSTA periodically updates and refines its suite of documents to better reflect developing market trends and practices.  The LSTA annually spends a significant amount of resources, in time, expertise and money, in ensuring that its documents are “living”; always reflecting market consensus.  Until now, only members bore the costs of maintaining the suite of documents.  The new Terms of Use are designed to more equitably share those costs.

What do the new Terms of Use mean for current members?  Current members continue to have access to all the LSTA documents included in their membership fee.  Importantly, current members are under no obligation to determine whether their trading counterparties are either members or license holders.

How do the new Terms of Use impact the trading and settlement platforms or the trading and settlement process?  They do not.   The loan trading platforms are also under no obligation to determine whether users of their respective platforms are members or licensees.  Instead, enforcement of the LSTA’s copyright is a matter solely between the LSTA and counterparties that use its documents.

Do the new Term of Use have any impact on the ability of non-licensees to use a trading platform and settle trades or on the enforceability of trades between counterparties?  No.  Even though the LSTA documents are protected by copyright, anyone can continue using the trading platforms and the absence of a license will not impact either the settlement of trades or the enforceability of trades between counterparties.  Again, the enforceability of the LSTA’s copyright is solely a matter between the LSTA and counterparties that use its documents.

Will the LSTA enforce its copyrights immediately?  No.  The LSTA has decided that in order to give non-member loan market participants the opportunity to study the new Terms of Use, review the license agreement and consider their options regarding membership or licensing, it will not begin to enforce its copyrights with respect to trades entered into prior to October 1, 2019. (This represents an extension of an additional month from our original plan).

How will the LSTA inform loan non-member market participants of the new Terms of Use?  The LSTA is reaching out to non-members who have not yet obtained licenses through publicizing this FAQ on its website, by word of mouth and through other avenues.  In addition, the LSTA’s principal loan trading documents bear the following legend:  The LSTA owns all intellectual property rights, including all copyright rights, in this document. This document may not be used, reproduced in whole or in part, adapted, modified, disclosed to others, or disseminated other than by members of the LSTA in good-standing and by those who have a current and valid license from the LSTA for use of this document. Any use of this document in violation of the LSTA’s rights may subject the infringer to statutory fines and other civil and/or criminal penalties.

How do I get more information about membership, licenses, or the Terms of Use?  For information regarding the Terms of Use, please contact LSTA General Counsel Elliot Ganz.  For information regarding membership or licenses, please contact Lisa Schneider.

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LSTA Newsletter: August 16, 2019

This week we cover LIBOR-Good News and Less Good News; Docs Terms of Use; Delayed Comp Docs Released; Loans Mag Announcement

Loans Magazine – Summer 2019 Edition

This edition provides members with valuable content on the latest developments in the syndicated loan market. An article from David Chmiel of Global Torchlight Limited which explores “Current Geopolitical Trends Impacting the Loan Market”. We continue with a series of articles on the many aspects of the LIBOR/SOFR transition, an analysis of the secondary loan […]

LIBOR Fallbacks: Good News… and Less Good News

There is good news – and less good news – on LIBOR fallback language in cash products like loans, FRNs and CLOs. On the good news front, it looks like most cash products are now including fallback language in new deals. This is critical because many instruments will be outstanding when LIBOR ends after 2021, and if they don’t have good fallback language, there could be contract frustration (and litigation). However, on the less-good-news front, the fallback language is not always consistent (which may lead to a lot of work to determine exactly how each instrument would fall back) or workable en masse (which may lead to traffic jams as everyone tries to amend their deals at the same time). We discuss the fallback status of FRNs and loans below. (And we’d gently remind readers that several CLOs have gone “hardwired”, per LCD and Covenant Review).

Primary Delayed Compensation: Drafts Released

Yesterday, the LSTA released drafts of the LSTA trading documents to be used in connection with the new Primary Delayed Compensation Protocol. Below, please find links to the clean drafts and blacklines marking the changes to the current versions of the Par/Near Par Trade Confirmation and Standard Terms and Conditions for Par/Near Par Trades.

Primary Delayed Compensation Protocol

The Protocol applies to a “Primary Allocation” which is an allocation of new money by a syndicate desk in connection with either (i) a new issue syndication or (ii) an amendment of an existing Credit Agreement. In addition, the Protocol affects when-issued secondary trades by (i) changing what constitutes an Early Day Trade and (ii) […]

FAQs: The LSTA Trading Documents’ New Terms of Use

As we previously noted, on May 17, 2019, the LSTA published a new suite of U.S. secondary market trading documents. In conjunction with the rollout of the new documents the LSTA changed the Terms of Use applicable to counterparties who use those documents. Since then, we’ve received many questions about the new Terms of Use and below we answer many of those questions.