Barry Zamore, managing director and par trader at Credit Suisse First Boston, is urging the buyside to take action on the issue of assignment fees. In two emails sent to buyside accounts this week, Zamore asks for a working group to be formed and for the buyside to draw a line in the sand on assignment fees. Specifically, he wants investors to send in all commitments to future deals “subject to a maximum assignment fee payable for any trade (regardless of sub-allocations) of some nominal amount ($1000).” He suggests that in the next few months—with an exact date determined by feedback—all commitments should be subject to the assignment fee clause. “If every account implemented this on every deal then the few remaining arrangers would have to give in,” he comments in one of the emails circulated to buyside accounts.
CSFB has for a long time made noises about assignment fees, but this is the first time loan market players can recall anyone trying to form a grass roots initiative to take action. Loan market bankers contacted immediately applauded the initiative, noting that the buyside will agree in principle. But one questioned the viability of success, noting the heavy opposition from some of the most important elements in the market. Calls to other dealers including J.P. Morgan, Citibank and Bank of America, were not immediately returned.
The crux of Zamore’s argument is that the idea behind assignment fees back in the late 1980s and early 1990s was to charge a single nominal fee to pay for the manual calculation of each holder’s commitment and interest payments. But now, “The technology has enabled us to do this same calculation with the touch of a button,” he states. The average par loan trade size has decreased from roughly $5 million to $2 million over the past few years, while the number of sub-allocations each manager makes on each trade has grown from one or two funds to three or more.
These developments have dramatically increased the financial burden that assignment fees have imposed on the buy-side and the loan asset class, he argues. “The buy-side is entitled to demand change immediately. The goal is to eliminate assignment fees forever! Immediate attention required,” he adds.
“CSFB has already eliminated assignment fees on our admin-agented loans for all of our buy-side clients, whether or not they trade with us,” the email declares. “Unfortunately, there are still a few large underwriters that refuse to budge on their internal assignment fee policies. Bond together and say enough is enough. Let’s get this market in to the 21st century. Check credit agreements before you sign on and incorporate these changes into amendments,” he concludes. Zamore is asking for volunteers for the buyside working group to contact him.