New secondary loan standards are a big change, says law firm

Law firm Richards Kibbe & Orbe says that the launch of new secondary trading standards for European loans this week will mark a big change for the way that par loans are traded. The new Loan Market Association conventions adopt some of the conventions of distressed secondary loan trading as the default standard for par loans as well, note London-based lawyers Louisa Watt and Roxanne Yanofsky.

One of the biggest changes is the adoption of the concept that “a trade is a trade”. This means that if conditions of the trade are not fulfilled, the parties cannot simply walk away from the trade. Other important changes are the fact that buy-in-sell-out (biso) damages will by default apply for par trades, and that delayed comp calculations will now follow the convention previously used for distressed trades.

The new standards bring European secondary loan trading closer into line with the US market, but differences remain, note the paper’s authors. For example, the LMA docs still require representation and warranties to be provided on a predecessor-in-title or step-up basis.