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IOSCO Leveraged Loans and Collateralized Loan Obligations (CLOs) Good Practices for Consideration: how will this impact leveraged loan documentation?
On 3 June 2024, the International Organization of Securities Commissions (IOSCO) published its final report on Leveraged Loans and Collateralized Loan Obligations (CLOs) Good Practices for Consideration . This guidance follows an extensive market consultation exercise which examined the impact on leveraged loan investors of fewer and looser covenant protections in transaction documentation together with a number of other conduct and transparency concerns within the market. In this article Lee Federman and Adam Wolinsky consider four of the good practice measures which focus on key transaction terms.
26 July 2024Lex situs and its discontents: English security over foreign assets
This article examines the distinction between the contractual and proprietary effects of a transaction in the context of English security over foreign assets. In particular, it considers the way in which creditors address, before and after transacting, the ineffectiveness of English security under the lex situs and the important role of equities arising between the contracting parties.
26 July 2024Strategic secrecy in loan covenant disclosures
Many companies choose not to disclose detailed information about their loan covenants despite regulatory requirements. This article explores the strategic reasons behind this decision, focusing on the potential costs of such disclosure and the implications for financial and regulatory practices. Analysis of a large sample of US loans suggests that companies that likely face tight initial covenants and frequent renegotiations are more likely to withhold these details to avoid negative reactions from other creditors such as trader creditors and bondholders.
29 June 2024High Court dismisses unmeritorious “freeman on the land” claims against mortgage lenders
This article considers the recent High Court decision in Stamp and its dismissal of unmeritorious “freeman on the land” claims against mortgage lenders brought by litigants in person. It considers the steps which led to the court’s decision, an analysis of the court’s reasoning and considers the impact it may have for future claims before the court (including the risk of a claimant being in contempt of court).
29 June 2024Certain key issues in private credit: loan structuring, tax issues and conflict considerations
This article examines certain issues that are particularly relevant for private credit funds as opposed to traditional bank financing, including timing considerations when making debt investments, key points from a lending perspective under investment loan documentation and potential conflicts of interest.
29 June 2024Does a bank owe a “retrieval duty” to the victims of fraud?
This article considers whether there should be a “retrieval duty” on banks to recover monies transferred as a result of an alleged fraud, following the failed strike-out application in CCP Graduate School Limited v National Westminster Bank PLC [2024] EWHC 581 (KB).
29 June 2024The mysterious pari passu principle
We know that Lord Justice Snowden’s landmark judgment for a unanimous Court of Appeal in Adler earlier this year1 emphasised the presumptive importance of the pari passu principle. But what does this principle amount to? What does it require? The term “pari passu” is used in judicial and textbook writings to refer to no fewer than four different principles. Regrettably, this is a reliable recipe for confusion. Three of these principles relate to distribution of value from the insolvency estate but are very different from each other, while the fourth is a principle of conservation rather than distribution. The undifferentiated and unreflective use of the term “pari passu” for one or other of these four principles leads to mistakes of both analysis and decision. This article explains the four principles, outlines the ways in which they differ, highlights the confusion resulting from not distinguishing amongst them, and argues that the term “pari passu” should be restricted to only one of the four.
29 June 2024DIP financing in US Chapter 11 cases: how sponsors are utilising equity conversions to obtain recoveries in reorganised debtors
This article examines sponsor-provided debtor-in-possession financing that converts into equity in the reorganised debtor upon emergence from bankruptcy, including the consequences of, and recent challenges to such sponsor-led convertible financing.
29 June 2024Security release filings, a rogue filer and the Economic Crime and Corporate Transparency Act
News broke earlier this year that roughly 800 security release filings, affecting 190 companies, had been fraudulently filed at Companies House, marking the underlying security interests as satisfied when they remained outstanding. New powers given to the Registrar of Companies under the Economic Crime and Corporate Transparency Act 2023 were used to rectify the register. The case shone a spotlight on the vulnerabilities of the system for registering the release of security.
29 June 2024When AI trading bots go rogue, think outside the (black) box
Chatbots have been dominating the headlines with some wildly entertaining reminders of the importance of understanding AI’s limitations. Trading bots deserve some attention too, not least because a lot of trading in financial markets is automated through software programs which could (and in some cases already do) use AI. We have seen cases where deterministic bots have concluded trades in the middle of the night at bizarre prices, or have gone shopping on the dark web and been arrested (confiscated) for doing so. This article swaps out the deterministic bots for AI bots and considers whether conventional legal principles still work.
29 June 2024
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