Isda unveils new European loan CDS trading standard

Isda has published a long-awaited template for European loan credit derivatives, which addresses cancelability under existing documentation. Unlike US leveraged loan credit derivative documentation, the new European standard is a reference obligation-based contract tied to a specific credit agreement. Also unlike the US, the European standard relies on determinations made by the calculation agent, rather than by reference to a trading standard determined by dealer polls.

However, the new contract is structured so that it will continue after the refinancing of the reference obligation, referencing instead the new loan (or loans) that refinanced the original reference obligation. Parties may elect when they enter into the loan credit derivative transaction that the contract will cancel if a refinancing occurs.