The United States Court of Appeals for the Second Circuit recently affirmed the 2020 Kirschner v. JP Morgan Chase Bank, N.A. ruling that a secured $1.775 billion syndicated term loan to Millennium Laboratories LLC (Millennium) was not a security. The decision is great news for the loan market, but a slightly different set of facts could easily lead to a different decision.
If you know anything about syndicated loan trading, you probably know the basics of transfer restrictions.
New term lenders typically need the consents of the administrative agent and the borrower in order to be admitted to the syndicate. New revolving lenders usually need those consents, plus the consents of any banks that issue letters of credit or swingline loans. In many syndicated loan deals, that’s the entire universe of transfer restrictions.
Earlier this month, the LSTA published a market advisory outlining some recent changes to the disqualified institutions provisions (the “LSTA DQ Structure”) set forth in the LSTA’s Model Credit Agreement Provisions (the “MCAPs”).
For over a decade, Lehman Brothers Special Financing (“LBSF”) has been litigating the enforceability of so-called “flip clauses” in connection with the post-bankruptcy liquidation of swap agreements. These clauses, which are common in structured financing transactions, specify the priority of payments when a swap provider (like LBSF) is in default. In particular, these clauses purport to subordinate the swap provider’s payment priority below that of noteholders when termination payments are owed due to the provider’s default.
Insurance markets have been watching the Supreme Court’s docket for its ruling on whether the Federal Government must compensate some of health insurers’ losses. Today the Supreme Court ruled that the Federal Government must satisfy these obligations. Insurers and holders of their claims are expected to seek billions of dollars of compensation.
On April 2, 2020, six days after the CARES Act was enacted, the Small Business Administration (“SBA”) released an interim final rule (the “Interim Final Rule”) implementing the Paycheck Protection Program (“PPP”). For an overview of the PPP sections of the CARES Act, see our previous alert, which is available here.
In a very short time, the COVID-19 pandemic has spread frightening levels of uncertainty all around the world. While many schools, businesses, and houses of worship have closed, the financial markets remain open. Like other markets, the secondary market for syndicated loans has experienced stomach-churning volatility and steep declines in asset prices in recent weeks. If you aren’t thinking about how COVID-19 could affect liquidity and settlements, you should be.