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Credit Quality: Past, Present and Future

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.

Loan Structure Revisited

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.

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The Volcker Rule Amendments: What Do They Mean for CLOs

Earlier today the Federal Deposit Insurance Company (FDIC) and the Office of the Comptroller of the Currency (OCC) separately approved final rules amending rules originally published in November 2013 that implemented the Volcker Rule. Importantly, today’s amendments do not affect loans and CLOs. The FDIC signaled that amendments to the part of the Volcker Rule pertaining to CLOs would be forthcoming sometime in the future. Today’s amended rules are available here.

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).