Yesterday the LSTA held their yearly board meeting and I thought it was time again to rehash the never ending Assignment Fee Issue. To start, CSFB supports the elimination of all assignment fees for the entire market. In fact, CSFB has offered to all other Agent Banks that we will waive assignment fees on all CSFB-Agented Loans if we receive equal treatment with their deals. This will give us the ability to make tighter markets and provide additional liquidity away from the admin agent. 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. Unfortunately, there are still a few large underwriters that refuse to budge on their internal assignment fee policies. Now it is time for the buy-side to finally say enough is enough. The original intent of assignment fees back in the late 1980's and early 1990's was to charge a single nominal fee to pay for the "manual" calculation of each holders commitment and interest payments. Obviously, the technology has enabled us to do this same calculation with the touch of a button. The average par loan trade size has decreased from roughly $5MM to $2MM over the past few years while the number 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 finanacial burden that assignment fees have imposed on the buy-side and the loan asset class. The buy-side is entitled to demand change immediately. THE GOAL IS TO ELIMINATE ASSIGNMENT FEES FOREVER! Immediate attention required:
* Dont allow underwritters to charge multiple fees for one trade; one nominal fee for one trade no matter the amount of sub-accounts
* Reduce Assignment fees significantly.
If the buyside community really gets behind these initiatives, you will create a change for the better. Bond together and say "enough is enough", lets get this market in to the 21st century. Check credit agreements before you sign on and incorporate these changes into amendments.
Please call me with any further questions
Barry Zamore
Managing Director
CSFB
After yesterday's overwhelmingly positive response, I thought I should relay some of the feedback I received. First of all, most agree that the buy-side controls their own destiny, to think that the Arrangers are going to decide to give up fees and trading advantages for the "good of the market" just won't happen. Let Dealers earn your trades by providing value to you, versus the other way around. Reward dealers for showing you good trading ideas, value-added research, ability to execute, and willingness to live up to their markets. Not getting the best price and being handcuffed to the admin agent because you need to "sell out of three funds" is not fair to your shareholders. It would be entirely easy for the buyside 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 (~$1,000). If every account implemented this on every deal then the few remaining arrangers would have to finally give in. In the next few months (a date to be agreed upon via your feedback), all commitments should be subject to the assignment fee clause above. Lets not forget that all Issuers pay the Admin Agent an agency fee to cover the costs of administering loans. The Issuers will realize that if their Loan is more liquid it will only benefit them down the road via tighter future spreads.
The buyside has the critical mass to make this happen, it doesn't just take the largest managers to speak up. We need everyone to band together and finally reduce the costs associated with this asset class. A working group needs to be formed buy the buy-side. We will make this happen!!!
Please call me with any further questions and to volunteer for a buy-side working group to push this initiative forward.
Barry Zamore
Managing Director
CSFB