February 5, 2024 - This interview was first published in the 2024 winter edition of Loans Magazine, which can be accessed here. The following is an edited version of the interview transcript. Before moving on from the LSTA to pursue other passions, EVP of Market Research and Co-Head of Policy Meredith Coffey sat down with VP and Director of Policy Research Andrew Berlin to recap her storied 30-year career in the loan market and share her thoughts on what’s to come for the trade association.
Meredith, I’m sure that most market participants would agree that your name has become synonymous with the loan market. Your impact has been invaluable and extremely significant. As part of your transition plan, I know as well as any of our colleagues and members that yours are very big shoes to fill.
I would point out that neither my shoes nor my feet are that big. They’re just attached to skinny legs.
Noted. Now, as you prepare to retire from the LSTA, it seems fitting to capture your legacy with an interview in Loans Magazine. I appreciate you taking time today to let us pick your brain a bit and get to know the person behind the policies.
How did you start your career?
I started my career in 1992. For those that remember, 1992 was a recession year. I came out of school into a recession, and I needed a job. Basically, the way I got into my career is by answering advertisements in The New York Times. Paper edition.
I started at Loan Pricing Corporation/Gold Sheets, and I had the very prestigious role of “league table slave.” League tables were extraordinarily important there, and the job generally involved having very important people in the loan market call and yell at me at quarter end. Still, I wasn’t a league table slave forever. Over the years, I developed a Latin America and emerging markets beat and research and then I took over the U.S. analysis for LPC.
When and why did you join the LSTA?
Fast forward 15 years, it’s 2007, 2008. I’d been thinking for a while I wanted to do more than just markets. I wanted to get into policy. I’ve been talking to the LSTA for a while and considering that we were at a point where the financial markets were cracking in the global financial crisis, it seemed like it was the right time to join the LSTA. I ended up joining in August 2008.
What exactly do you do at the LSTA?
I co-head policy with Tess Virmani. I worked in that role for a long time with Elliot Ganz, who is heading advocacy now. What that entails is thinking about policy in terms of how it affects the loan and CLO markets. This can include an exogenous factor like Libor transition or regulatory oversight or something that’s percolating up from the ground, like ESG —which is very much in Tess’s domain—and providing a market response.
I tackle these issues from a market perspective: How does this change impact the market? How do the arguments that are going on in the regulatory sphere or the end of LIBOR, for instance, affect the market?
And then there’s a bunch of writing. I do the newsletter, I do a lot of presentations, things like that, which are meant to discuss what the LSTA is tackling from a policy and market perspective.
What has been the most rewarding aspect of working at the LSTA?
Tackling very knotty problems with very smart people. I really like to do that and to do it over and over again. That’s really the description of the job. Sometimes you solve the problem. Sometimes you don’t.
What was the most challenging aspect?
It’s the same thing, just the flip side of it. The LSTA has over 600 institutional members and more than 20,000 individual members. Each of those individual members has their own perspective and their own opinion and their own thoughts about how we should be doing things.
Now, the LSTA is a consensus organization, so we try to develop our positions consensually. Getting consensus with 20,000 people is not easy. You’re never making everybody happy. And that is frustrating because you are trying to go forward and be the voice and craft the response of the market with your membership. But the membership simply doesn’t agree. And sometimes they disagree very vociferously, so that can be challenging.
What’s one of the most challenging projects you’ve been involved in?
One of the most challenging and, frankly, the most impactful, is one that folks no longer think about at all, which was Libor transition. It really was a very complex six-year project that Tess, Ellen and I shepherded the U.S. loan market through, and it could have gone disastrously wrong. It had many, many angles to it. It had a market data and analysis angle. There were going to be economic winners and losers. There were massive operational challenges. If we went to Daily SOFR compounded in arrears, the operational challenge in the loan market would have been huge. Documentation needed to be changed. The legal nuances in the market need to be changed. All the existing loans that were outstanding needed a way to fall back.
It was an enormous undertaking that I was determined to get through. And the loan market did get through and the fact that people don’t even think about it shows that it was successful.
It’s worth noting that your retirement may have come a bit earlier had it not been for the prolonged process.
That is correct. My plan was to retire at the end of 2021 and go on to my next chapter, except that the end of legacy Libor was extended by 18 months, which forced me into a longer transition plan… albeit one that only I knew about.
What do you think have been the LSTA’s biggest achievements in the policy space?
There’s one that’s less obvious and one that’s more obvious. The less obvious one is Libor because again, people have forgotten about it. It came and went and was a non-event, but that non-event required huge amounts of work and strategizing.
I think what probably sticks in the market’s mind more is risk retention. And that certainly was a huge victory, but in a different way. The proposed rule that would have applied risk retention to CLOs was just wrong. The idea behind risk retention in the Dodd-Frank Act was that if an institution originated a bunch of assets, the institution would retain 5% instead of selling all of them into the market. That’s not what open-market CLOs are – they don’t arrange the loans, they buy and manage already-originated loans. The LSTA argued about it in DC and that just fell on deaf ears.
But we were right on that front. It was also very frustrating because people were painting CLOs as “CDOs and scary and wrong and evil,” and they just aren’t. We stuck to our guns, and we litigated. We lost in the lower court, we appealed, and we won in the higher court. That was very satisfying. The LSTA got a lot of props for that and should have gotten a lot of props because that was a lot of hard work and a lot of perseverance in the face of long odds.
Let’s go back to some personal questions. Why are you retiring?
Retire is a strange word because, although I have been in the loan market for more than 30 years, I’m way too young to retire. I just don’t think life is a one-act play. I think many people are interested in many things —and you should do more than one thing. So just because I’ve done loans for the last 30 years doesn’t mean I need to do them for the next 30 years. That is really why I’m moving on. It’s not so much retirement. I’d say it’s more renaissance or reinvention.
Something everyone would totally expect after 30 years in the loan market. I am going to pursue a degree in Fine Arts. I’m going to be drawing and painting and maybe sculpting. We’re conducting this interview on December 28th. I start classes on January 22nd, so no rest for the weary, right?
What do you see as coming next for the LSTA?
I’d like to answer that on the policy front because I’m best situated to talk about policy—but, to be clear, the LSTA does a ton of other work beyond policy. On the policy side, the good news is we’ve cleared the decks a lot this year. We got Libor transition done. The Kirschner “loans-as-securities” issue is hopefully largely behind us. Private funds disclosure rule is largely not implicating CLOs (although it does implicate a number of private funds). Conflicts in Securitizations ended on a relatively positive note. This puts you in a position to succeed. But there are challenges.
The thing on the policy front that might be the most transformational is the SEC’s liquidity risk management rule for open-end funds. We have open-end funds that invest in loans—and loans don’t settle in T+2 or T+3 and the SEC is focused on that as this rule goes forward. This might be the regulatory issue that’s most transformational on the loan settlement front, which is a big issue for a lot of people in the loan space.
What do you think some of the most challenging things for the LSTA will be?
On the policy front, I think liquidity risk management is going to be a big one. It’s similar to Libor transition, albeit focused on a smaller space. Like LIBOR, liquidity risk management and settlement involve many parties and many objectives. There’s an operational angle, there’s a technology angle, there’s a behavioral angle and there’s a documentation angle. It would be very much a multi-focal project.
From your perspective, how can members best utilize the LSTA?
Get involved. The LSTA does so many things that people don’t know. Again, I’m speaking from the policy front, but we obviously have a data side, we have a legal side, we have a number of conferences, we have a whole operational effort, and more!
A good starting point is reading the LSTA newsletter. That will, at some level, give you a glimpse into what the LSTA is doing. There’s a number of committees. There’s a number of experts at the LSTA that people should reach out to if they want to be engaged on issues. Reach out to the subject matter expert who’s written an article that you like. You can begin talking to them. You can get on the right committee. Oh, and go to our conferences!
What’s the greatest change you’ve seen in the market since you’ve become active in it?
Well, it’s become a market, which is kind of a big change. When I started in the loan space—that was 1993—there was no institutional loan market. It didn’t exist. There were term loans that were bought by some loan mutual funds. Now the institutional loan market is $1.4 trillion.
What hasn’t changed?
We’re still solving that settlement problem, which is a very knotty multifaceted challenge.
What do you see as some of the challenges and opportunities for the market and members going forward?
The market continues to evolve. It’s not a steady-state situation. There’s lots of discussion about the rise of private credit. This shows how the market is evolving (or devolving) and becoming something that wasn’t five years ago. And that thing may be a semi-integrated leveraged loan market that has multi-billion-dollar BSLs on one end of the market, large-cap private credit deals in the middle, all the way down to middle-market and bilateral direct loans on the small end. This is all along the spectrum of the leveraged loan market; instead of thinking about it in a very fractured way, we may start thinking about it in a holistic way. I think that will be a very interesting thing to watch.
What do you think are the most common misconceptions about the loan market?
One that drives me crazy is the way that people talk about the systemic risk in loans and CLOs. One of my last big projects was a white paper on why CLOs and leveraged loans are not systemically risky. It tackles this in the very language and metrics the Financial Stability Oversight Council, which is coordinated by Treasury and Fed, uses. We look at each aspect of the loan and CLO market using their metrics to show that while there’s credit risk there, there isn’t systemic risk.
It’d be really nice if we could move past the talking point—that is repeatedly debunked—that loans are systemically risky. Even the GAO said they were not!
What advice or suggestions do you have for someone that might be interested in starting a career in this industry?
If you have the luxury, it’s important to figure out what it is that you like about your job and go at it with a passion. There’s plenty of people who do their job because that’s what they do and don’t take a step back and think about why they do it. Figure out what it is you want to do and then go after that. Because commuting three hours a day to do something you don’t like very much doesn’t sound great.
What one professional accomplishment are you most proud of and want to be remembered for?
Broken record, but Libor transition. Only the people that were in the trenches know how nasty those trenches were and how important it was to get it solved.
What are you going to miss most about your role in the loan market and at the LSTA?
Solving knotty problems with very smart people. A close second is coming up with headlines that amuse me for the newsletter. I do like the problem solving and I do like having a creative outlet.
Lastly, are there any words to live by that you can leave us with, either that have served you throughout your career that you’ve developed organically over the course?
I don’t know if this served me in my career per se but be a good and principled person first and be a good businessperson second.
I think that will resonate with a lot of people. Well, thank you very much for this. We will certainly miss you and appreciate you and wish you all the best in your future endeavors and hope that you stay in touch.
I look forward to seeing all that you and Tess and Elliot and all the LSTA will be accomplishing in the coming months and years.