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DC Court of Appeals Ruled in Favor of LSTA in Risk Retention Lawsuit

This morning, the Court of Appeals for the DC Circuit ruled in favor of the LSTA in its lawsuit against the SEC and the Federal Reserve Board, concluding that managers of collateralized loan obligations (CLOs) are not subject to the credit risk retention rules mandated under the Dodd-Frank Act.

DC Court of Appeals Ruled in Favor of LSTA in Risk Retention Lawsuit

This morning, the Court of Appeals for the DC Circuit ruled in favor of the LSTA in its lawsuit against the SEC and the Federal Reserve Board, concluding that managers of collateralized loan obligations (CLOs) are not subject to the credit risk retention rules mandated under the Dodd-Frank Act.

Risk Retention Litigation: The Uncertainty Principle

Many market participants have been closely following the LSTA’s risk retention lawsuit against the SEC and the Fed and many rumors have come to our attention concerning the status of the case.  Specifically, we have been hearing that the decision would come out this week (it did not) and that we will prevail (we may or we may not).  The following brief summary is meant to describe where we are now and explain what is actually likely to happen in the coming days or weeks.

Risk Retention Lawsuit: The Government Strikes Back

On June 7th, the Board of Governors of the Federal Reserve and the SEC filed a responsive brief in the LSTA’s ongoing lawsuit relating to risk retention for CLO Managers.  The LSTA has alleged that the agencies overstepped their authority when they determined, contrary to the statutory language, that CLO managers were “securitizers,” subject to the risk retention requirements under Section 941 of Dodd-Frank and erred by tying the required amount of first-loss horizontal risk retention to 5% of the fair value of a CLO rather than something closer to its credit risk as mandated by the statute.

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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.