November 14, 2018 - As the year draws to a close and we start the unenviable task of dunning members for 2019 dues payments, we gave some thought to what we’ve done in the past 11 months. As it turns out, a lot. So, we thought, why not share?
Say Goodbye to Risk Retention
On February 9, 2018, the LSTA scored the most important advocacy victory in its history when 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 held that the risk retention rules promulgated under section 941 of the Dodd-Frank Act cannot be applied to open market CLO managers. After grappling with risk retention for almost eight years, the LSTA finally prevailed in its efforts to obtain relief for CLO managers from the risk retention rules. The ruling vindicated the LSTA’s long-held analysis of the clear statutory language and reflected the reality that CLOs have performed very well for over 20 years, including through the 2008 financial crisis.
LIBOR’s going where?
This was the year when it became abundantly clear that global regulators are serious in their efforts to transition away from LIBOR as the primary reference rate for capital markets. The LSTA has been spearheading those efforts for the U.S. syndicated loan market. The LSTA is a member of the Alternative Reference Rate Committee (ARRC), it co-chairs its business loans and CLOs working group, and is a member of the securitization working group and the accounting working group. In its role as business loans co-chair, the LSTA played a major part in developing the ARRC’s consultation for loans, which ultimately will inform best practices for the industry’s LIBOR fallback language. The LSTA took its knowledge on the road, speaking at conferences, meeting with members and holding webcasts that more than 700 individuals attended.
A steady stream of documents and publications
This year again, our legal group produced a large array of important standard documents and publications. Leading the way, a forward-looking three-part Blockchain white paper that outlined the intersection of loans and distributed ledger technology. On the domestic documentation side, we produced an Incremental Facility Amendment, a Form of Beneficial Ownership Certification, and Investment Grade Model Credit Agreement Provisions. We also significantly expanded the scope of our cross border documents (now covering Mexico, Chile, Colombia and Peru) with the publication of LatAm Cross Border Credit Agreement Provisions and a LatAm Trade Confirmation. Finally, we also published a new ERISA Advisory for Credit Agreements. Coming soon: A new Agreement Among Lenders coming soon and much more next year.
OPERATIONS AND SETTLEMENT
Primary Delayed Comp
Last month, 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. The Protocol, facilitated by the LSTA with the participation of a wide range of market participants, should result in important changes in practices and behavior that will reduce not only primary settlement times, but also those in the secondary market. The LSTA will work with members to amend the Standard Terms and Conditions for Par/Near Par Trades while technology platforms, especially the electronic settlement platforms, will implement changes to reflect the new Protocol.
This has been a banner year so far for member education at the LSTA (and it’s far from over!). In addition to our annual staples (about which more below), we have, to date, hosted 17 CLE-eligible presentations (for a total of 27.5 credits), attracting over 4,000 attendees and generating over 1750 CLE certificates. We end the year with a bang, presenting seven (!) more webinars between now and December 12th, for an additional 8.5 credits. The LSTA also hosted six webinars that were not CLE-eligible attracting an additional 2000+. This year we also introduced our first seven podcasts, focusing mainly on primary and secondary market legal issues. A great start and we look for many more next year.
And, of course, we held our venerable and well-attended annual events including our 23rd Annual Conference, our investor road shows in Tokyo and Hong Kong, two LSTA/LMA legal conferences (London and New York), the sold-out Credit Agreement Teach-in and our Operations Conference. Plans are already afoot for next year’s packed agenda.
DATA AND ANALYTICS
Our data and analytics team covered and reported on a record $565 billion of loan trades so far this year and broke down the data in three trade data study webinars, ten monthly trade and settlement reviews, and ten monthly mark-to-market reviews. The group has also adjudicated 26 “shift dates’ so far this year.
All in all, a very busy and productive year at the LSTA. And, with your support, we are hoping for an even more productive 2019.