The Loan Syndications and Trading Association has released the final versions of its new secondary market trading documents. The documents establish market standards that clarify previously ambiguous areas of market practice. For example, the LSTA has introduced a new standard for the payment of delayed compensation for late-settled distressed trades where the seller pays the buyer interest accrued from 20 days after the trade date until the trade settles. Under the new approach, interest claims become the exception rather than the rule in distressed delayed compensation.
With the adoption of the new trading confirmations, the LSTA also recommended that any days considered holidays by either the New York Stock Exchange or the Federal Reserve Bank of New York be treated as loan market holidays for purposes of calculating the start date for delayed compensation. Delayed compensation accrues on loan market trades that do not settle within a set number of business days after trade date. The revised documents include a purchase and sale agreement for the transfer of distressed bank loans, par/near par trade confirmation, distressed trade confirmation, and trade checklist.