Distressed documentation

The set of legal standards used for the secondary trading of many loans that are trading at distressed prices. They differ from the more common standard, par documentation, in several points of detail and the transaction costs involved (such as legal fees) are typically much higher than for trades done with par documentation.

Distressed documentation loan trades are typically settled much more slowly than those done with par documentation. Standard settlement times in the US leveraged loan market are T+20 for trades done with distressed documentation. In practice trades can take much longer to settle, but counterparties are entitled to delayed compensation in the case of a delay beyond 20 days. One of the most important differences between distressed and par documentation is that distressed documentation includes a purchase and sales agreement.