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What are the Regulators Really Saying about Loans?

For months the financial press has been reporting on the Federal Reserve’s concerns with the leveraged loan market, but it wasn’t until Fed chairman Jerome Powell’s testimony before the House Financial Services Committee last Wednesday that he specified the actual extent of those concerns.

On Leveraged Lending: Original Sources

Reports continue to appear about regulators opining on the leveraged loan market. And so, we once again go to the original sources to see what they are saying. We began this process in December, when we recapped views from the OCC Semi-Annual Risk Assessment and the Federal Reserve’s Financial Stability Report, as well as speeches and comments from Fed Chairman Powell, Vice-Chairman Quarles and Comptroller Otting.

SLOO: Look to the Yield Curve

In early October, we detailed what practitioners monitored in the third quarter leveraged loan market. This week, in its Senior Loan Officer Opinion (SLOO) Survey, the Fed published what loan officers noted on third quarter. While no one saw the same things, the SLOs flagged a metric that could portend a downturn. (Hint: Yield curve inversion.)

The LSTA Comments on the Leveraged Loan Market

There recently have been several voices expressing concern about the state of the leveraged loan market. The Loans Syndications and Trading Association (LSTA) would like to take this opportunity to answer some questions and dispel some of the misperceptions about the leveraged loan market.

Primary Spreads Stabilize in February, Secondary Spreads Compress

After breaking records (and investors’ hearts) in January, the leveraged loan market settled somewhat in February. In turn, the rapid spread deterioration – or improvement, depending on one’s world view – slowed. Below, we run through the numbers that defined February.

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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.