The headline above is slightly – but only slightly – tongue in cheek. With all the noise around leveraged loans (and general silence around high yield bonds), one might think that i) loans suddenly have migrated down the capital structure and ii) loan documentation is far worse than bond documentation. In fact, neither is true.
This is a presentation that Elliot Ganz, our General Counsel and Chief of Staff, along with Michael Nechamkin of Otocagon, Jeff Bakalar of Voya and Howard Tiffen of First Trust did at the DC Finance Conference in Tel Aviv in mid June 2019
What are leveraged loans? See the attached for the answer
Do leveraged loans create systemic risk? Read this FAQ to find out the answer
This week we cover House Lev Loan Hearing; Asia Conferences Report
Are leveraged loans systemically risky? A subcommittee of the House Financial Services Committee held a hearing this week to examine this very issue, one that the LSTA has scrutinized closely and that regulators, reporters and commenters have been mulling over for many months. (A webcast of the hearing is available here and the Committee memorandum is available here). Below, we review the hearing and address the major themes that emerged.
Lawmakers and regulators are continuing their inquiry into whether loans create systemic risk. In recent weeks, senior regulators have explained why they believe leveraged loans do not create systemic risk.
Last Wednesday, LSTA executive director Lee Shaiman moderated a panel at the 7th Annual LPC Middle Market Conference on whether leveraged loans and CLOs pose systemic risk to the economy, an issue that has received a lot of attention in the financial press in recent months.
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