The move to eliminate or drastically reduce assignment fees is progressing, with plans for a July 4 start date and tactics emerging to ease investor concerns over taking action on the contentious issue. The movement is being spearheaded by Barry Zamore, a Credit Suisse First Boston managing director and par trader, who two weeks ago sent emails to the buyside calling for a working group to be formed and a line to be drawn in the sand on fees (LMW, 5/31).
A buysider following the situation said the issue is becoming more important as the average size of trades shrinks and firms have more funds to allocate to. But he acknowledged there are substantial barriers to forcing the issue. Setting assignment fees at a fixed level may be seen as price fixing, he said. Furthermore, if the banks were forced to charge one assignment fee for multiple sub-accounts, they could just increase the assignment fee to $20,000, he added.
Zamore notes in a third email sent last week, that the only negative responses from accounts he has heard are from those that believe if they speak up and take a stand against the few remaining arrangers that still haven't changed their assignment fee policies they will get shut out of new deals or their allocations will be cut. For the full text of the three emails, visit www.loanmarketweek.com.
He responds that he has a way around these problems. "There is a working group that would suggest that accounts commit to new deals if the following language was part of their commitment; subject to a maximum assignment fee payable for any trade (regardless of sub-allocations) of (some nominal amount to be determined)." Critical mass is essential, he states. "The buy-side working group would compile a list of all firms that agree to have all future commitments be subject to this assignment fee language. And to alleviate the fears of some, the list will not be made public until we have over 50 firms on the list... Arrangers must listen to the the voice of all their buy side clients!"
The First Two Emails Circulated By Zamore On Assignment Fees