10 July 2018
Secondary loan trading volumes in the US continue to grow whilst in the EMEA region have remained relatively constant since the financial crisis in 2008. The LSTA reported 2017 as a record year for secondary loan trading in the US with a volume of $635 billion with the LMA reporting a volume of $57.67 billion for the same period. The supply/demand imbalance, which shaped the European secondary markets in 2017, is expected to continue through 2018, however, against this backdrop, an eye must be kept on increasing covenant-lite terms and restrictive transfer provisions, which may impact secondary market liquidity.
In March 2018, the European Commission published a Proposal for a Directive on credit servicers, credit purchasers and the recovery of collateral and a Proposal for a Regulation on the law applicable to the third-party effects of assignments of claims. If enacted in their current form, these legislative proposals would impact the secondary loan market and will therefore be followed with interest by those involved in secondary loan trading in the EU. Clifford Chance has written a briefing note on each of the proposals, which are available on the Financial Markets Toolkit on the Clifford Chance website.
The trading of loans can raise complex legal issues particularly in relation to guarantees and security, withholding tax, confidentiality and regulation. On cross-border transactions, the local laws of each relevant jurisdiction need to be considered. This loan trading guide is intended to provide all secondary loan market participants (whether a financial institution, fund or other non-financial entity, on the buy side, the sell side or acting as a broker/dealer) with an insight into the principal local law issues to consider when trading corporate loans in the secondary loan markets across various jurisdictions. There are, of course, other issues which may affect a loan trade and any related collateral, particularly in multi-jurisdictional transactions (such as financial assistance, corporate benefit, sanctions and intercreditor issues). These sorts of issues should be investigated as part of the due diligence process carried out on the asset and appropriate advice sought. Our global debt and claims trading practice is uniquely placed to offer our clients a seamless and fully integrated experience helping our clients navigate through the myriad of local law issues that arise in multi-jurisdictional debt and claims trades. Should any questions arise out of this guide, please do not hesitate to get in touch with any one of the contacts listed at the back of this guide or your usual Clifford Chance contact.
This is the third publication of this guide, which incorporates 17 jurisdictions.