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LSTA Newsletter – January 17, 2020

A short one this week: one article on the borrower’s arguments for “hardwired” LIBOR fallbacks, and another article on the latest in what the LSTA is doing in the ESG space. Oh–and a friendly reminder to treat MLK Day as a holiday for delayed comp purposes.

The Borrower’s Argument for Hardwired Fallbacks

According to recent research by Fitch, borrowers should have a compelling appetite for “hardwired” LIBOR fallbacks. The downside risk of the amendment fallback – ending up in Prime – may be more likely than borrowers appreciate and the cash flow and ratings implications could be material. We discuss all below.

LSTA Newsletter – January 10, 2020

This week, we recap 2019 in both the primary and the secondary markets. We also announce the LSTA’s Form of Investment Grade Term Sheet. And what’s a week without LIBOR? We provide a SOFR timeline and remind members that we’ve recommenced our weekly LIBOR calls.

LSTA Newsletter – December 20, 2019

This week, we revel in the sighting of a big SOFR loan (well, sort of). We turn to the markets to discuss the secondary in winter. We eye Washington and the OCC as they flag risks (LIBOR and potentially leveraged lending). We remind our members that Christmas and New Year’s are Loan Market Holidays (but note […]

OCC and Risk I: LIBOR Cessation

The regulators are coming. In summer 2019, the SEC flagged the risks around LIBOR cessation and provided guidance around managing risk for the entities it regulated. Last week, the Comptroller of the Currency (OCC) did the same for the banks it regulates.

OCC Risk Assessment II: Leveraged Lending

As discussed nearby, while the OCC’s Semiannual Risk Assessment flagged LIBOR cessation as an emergent risk, its tone was balanced on credit risk. First, the OCC noted that “[c]redit quality remains strong, as measured by traditional performance metrics”.

Thursday, February 20, 2020

Tess Virmani, Associate General Counsel & Executive Vice President, Public Policy, will join the panel discussion “LIBOR Transition – Are You Ready?” at Paul Hastings’s LIBOR Transition 2020 Symposium in New York City.

Shelling for SOFR

SOFR syndicated loan origination is up and running! Sort of. On Friday, Shell announced a $10 billion SOFR (and sustainability)-linked financing. The $10 billion unsecured loan , led by Bank of America and Barclays, is split into a five-year $8 billion revolver and a one-year $2 billion facility.

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SOFR Index (and Averages) are Coming!

he SOFR Index (and Averages) have created considerable buzz in the loan space. The good news: Last week, the New York Fed announced it would start publishing them on March 2nd. The bad news: Due to various loan idiosyncrasies, these tools – while still beneficial! – may be less useful than for other asset classes. We explain all below.

LSTA Newsletter – February 14, 2020

This week, we start off talking about how “loans as securities” might morph into “loans as direct loans”. On a related(ish) note, we also discuss direct lending trends. We dig into LBO trends, looking at now (2019) and then (2007). And, finally, we ponder the evolution to SOFR (and, specifically, cash spread adjustments).

LBOs: Less Leverage? More Flex!

An eternal question is “How do the current crop of leveraged loans compare to the 2007 vintage?” Today we have an answer. Covenant Review recently compared recent jumbo LBOs to their pre-crisis counterparts

Quarterly Bankruptcy Roundup

This week Rich Levin of Jenner & Block once again presented his quarterly review of recent court decisions of interest and importance to the lending and bankruptcy world.

LIBOR & SOFR: Spread Adjustments

Folks that know LIBOR is likely to end soon after December 2021 probably also know that SOFR, the likely replacement for USD loans, is a different kind of rate. While LIBOR theoretically includes an element of bank credit risk, SOFR is an overnight risk free rate.