TheLoan Syndications and Trading Association met last week to continue hammering out standard language for assignments, picking up on an initiative started last October. One of the key issues being examined is whether borrowers can buy back their own debt in the secondary market, taking out a position of one lender rather than paying the group back on a pro rata basis.
Jane Summers, general counsel for the LSTA, said the group is putting an additional restriction on assignments and a provision is being added to prevent borrowers from taking assignments. "The concern is that the borrower could come into the secondary trading market and say as investor, and not a borrower, that he's going to buy the lender's position," Summers said.
She explained there is legal language in loan documents called sharing provisions, which state that if one lender gets paid back, that lender must split the pro rata money with the other lender. Other issues are still being worked on and should be resolved at the June 14 meeting. One is the borrower consent provision on assignments. This states that if a borrower does not expressly refuse consent within five business days, he or she is deemed to have consented.