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Capital Markets Law Journal Advance Access originally published online on June 30, 2007
Capital Markets Law Journal 2007 2(3):281-294; doi:10.1093/cmlj/kmm020
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© The Author (2007). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Loan only credit default swaps—the story so far

Martin Bartlam and Karin Artmann*
*Martin Bartlam (Partner) and Karin Artmann (Senior Associate), Orrick, Herrington & Sutcliffe, London.

The first 150 words of the full text of this article appear below.


Key points

  • The market for Loan Only Credit Default Swaps (LCDS) is expected to develop rapidly, but the market documentation for this product is proving to be a difficult issue as a result of differing views by users of the product and divergent approaches between the US and European markets.
  • The International Swaps and Derivatives Association, Inc. (ISDA) has, on 4 May 2007, released a long-awaited revised draft of the European LCDS. The finalization of this draft is not far off, but certain important issues are yet to be finalized.
  • Rather than speculate on the outcome of such discussions, this article looks at the development of the European LCDS market, the motivation and needs of its participants and takes stock of the European documentation before it underwent the recent almost year-long consultation process. It therefore compares the European LCDS of May 2006 against the US LCDS of June 2006 (ignoring . . . [Full Text of this Article]

 

   1. Introduction
 

   2. Growth in the underlying–syndicated secured loan market
 

   3. Factors influencing the decision to hold physical or synthetic positions
 
Attitudes of new entrants to the credit market
Attitudes of banks and new regulatory standards
Developing loan indices and service providers
The LCDS documentation
Motivation of market participants

   4. Key documentation issues
 
Callability/cancelability
Restructuring
Reference Obligation
Deliverable Obligation
Substitution of the Reference Entity
Substitution of the Reference Obligation or Deliverable Obligation
Syndicated Secured Dispute Event and Syndicated Secured Resolution
Settlement

   5. Conclusion
 

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Capital Markets Law Journal 2007 2: 243-244. [Extract] [Full Text]