Coordinating Swap and Loan Documentation
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Gain insight into the legal and regulatory implications clients entering into interest rate swaps.This topic will assist loan counsel in understanding the legal and regulatory implications of their clients entering into interest rate swaps in order to hedge the interest rate risk associated with a credit facility. For such a hedge to work properly, it is crucial for loan documentation to include the appropriate swap terms, and for loan counsel to comprehend how swap and loan documentation work in tandem. This includes ensuring that any security instruments properly secure a borrower's swap obligations; the interest rate terms, including LIBOR fallback terms, match between the swap and the loan; the swap terminates on its own terms; and the parties are complying with Dodd-Frank regulatory requirements. Following this information, loan counsel will be able to identity swap-related pitfalls, and more efficiently draft loan documentation for hedged credit facilities.
AuthorsAlec P. Fraser, Michael Best & Friedrich LLP Cheryl L. Isaac, Michael Best Friedrich LLP
Introduction to Hedging and Interest Rate Swaps
• What Is an Interest Rate Swap?
• How Hedging Works in a Credit Facility
Swap Documentation Overview
• ISDA Document Architecture
• Dodd-Frank Regulatory Considerations
Coordinating Loan Documents With the ISDA Master Agreement
• Ensuring Swap Obligations Are Secured by Loan Collateral
• Compliance With Anti-Tying Laws
• Other Best Practices for Coordinating Swap and Loan Documentation
The LIBOR Phase-out
• Why Is LIBOR Going Away?
• Introduction to SOFR
• How to Prepare for the Transition From LIBOR