LSTA’s Revised Trading Documents Allow Revolver Loan Investors to Protect Their Posted Collateral — But Only If They Ask

On June 28, 2013, the Loan Syndications and Trading Association (“LSTA”) announced that the revised Collateral Annex for Loan Participations and revised LSTA Par and Distressed Trade Confirmations became effective. The revisions to the LSTA’s suite of documents have improved the ability of investors in revolver loan participations to protect themselves against the lender of records’ insolvency risk. Investors face this risk when they are required to post collateral with the lender of record to support their obligations to fund the borrower’s future draws on the revolving loan under the participation agreement. In this article, SRZ partners Lawrence V. Gelber and David J. Karp and former SRZ attorney Erik Schneider discuss in more detail the revisions to the LSTA’s documents.