"New LSTA Distressed Buy-In Sell-Out Procedures" By Paul Haskel and James Ohlig

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September 26, 2011

The LSTA's newly-released (effective September 9, 2011) Standard Terms and Conditions for Distressed Trade Confirmations contain a new and powerful set of provisions that, under certain circumstances, permit a party to terminate its obligations under an open trade confirmation for distressed bank loans if its counterparty fails to perform its settlement delivery obligations in a timely fashion. While the terminating party would not be relieved of its loss or gain on the trade, it would thereafter be able to effect a cover transaction with a third party. In this memorandum, Richards Kibbe & Orbe LLP attorneys Paul B. Haskel and James J. Ohlig describe the details of these new buy-in/sell-out procedures, briefly compare them to the par/near par rules which preceded them and discuss the potential impact on the timing of trade settlements and on the distressed trading market as a whole. 

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