The Loan Syndications and Trading Association adopted a new set of primary market standards at its board meeting two weeks ago that became effective June 1. The standards address timelines for allocations and commitment; the funding of "B" loans; legal options; a four day credit agreement review period; electronic delivery of closing documents; closing document status reports; and timing goals for recording the sale of fully-funded loans.
The standards set the deadline for sub-allocation at T+1. "I think the most important thing that is imbedded in the guidelines is articulating as market standards that institutional investors have to make their sub-allocations within one business day of receiving their allocation from the arranger," said Jane Summers, general counsel for the LSTA. The LSTA did the same for trade confirms in the secondary market, she added. This now creates consistency between the primary and secondary markets.
The standards were developed by a working group that included members of both the buyside and sellside. Scott Krase, portfolio manager with Oak Hill Advisors, became involved in the effort because of his frustration with post-closing follow up. "To have consistency in all aspects, you have a market that is much more liquid and allows many more investors to participate so they know what to expect," he said. "Everything on there makes sense. Nothing should strike anybody as 'Boy, that's new. I can't believe that was or was not going on before.'"
Glenn Stewart, head of Bank of America's syndicate desk co-led the effort. Stewart believes issuers, arrangers and investors will benefit from the standards. "Any time you can put in some best practices that provide some guidelines on how people should do business so they are not surprised by twists and turns of certain deals is a help for everybody," he said. "It's another positive that the industry is working together to standardize the business while leaving the huge flexibility that our asset class has." Stewart said the next step is for everyone in the business to communicate the new standards throughout their franchise to make sure everyone understands them.