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RK&O assists its clients in navigating and transacting business in the rapidly evolving derivatives market, with its many innovative products and structures and developing rules and regulations.  Our extensive experience in the underlying debt and equity markets and our representation of industry groups, leading investment banks and hedge funds provide the foundation for our derivatives practice.  We currently represent industry groups in connection with structuring and implementing new derivative products; dealers and market makers in developing trading strategies that require a comprehensive understanding of debt and equity instruments; and hedge funds in connection with establishing master derivative trading relationships with dealers and prime brokers.  We regularly provide training seminars to our clients about emerging products and frequently advise on the anticipated effects of corporate events and other issues with market-wide impact.

We represent cross-border, industry-wide working groups in developing and drafting the standardized documentation currently governing all standard U.S. loan credit default swap transactions and European loan credit default swap transactions.  Because of RK&O’s long experience in the underlying leveraged loan market, we have been instrumental in helping these groups establish standards for public and private information flow, frame issues concerning application of securities laws in the loan market, and institute market-driven modifications to existing loan settlement regimes. Following the successful launch of these products, we were retained by both the International Swaps and Derivatives Association, Inc. (ISDA) and the Loan Syndications and Trading Association, Inc. (LSTA) in connection with related projects, including the ISDA loan credit default swap index product and the LSTA’s efforts to address structural and settlement issues which arise in connection with total return swaps on bank loans.  

Our clients frequently combine cash market strategies and derivative hedging strategies, and often creatively link hedges across asset classes and markets.  Our knowledge of the underlying asset classes and the markets in which they trade allows us to help our clients analyze risk and execute these strategies.  While credit markets, trading instruments and asset classes are rapidly converging, the need to understand credit structures and credit risk remains critical.  We therefore work closely with our clients to analyze the structure of underlying credit instruments, isolate and understand the risk being traded, and eliminate unintended incidental risks not part of the derivative transaction.  In addition, based on our expertise in both the underlying asset class and the derivative product, we help clients design and execute derivative hedges for single secured loans and portfolios of secured and unsecured loans utilizing total return swaps, loan credit default swaps and traditional credit default swaps.  In connection with a credit default swap, we help clients identify appropriate structures for the derivative transaction and understand the underlying credit issues and potential corporate events that may affect the derivative transaction once it becomes outstanding.  To do this, we work extensively with our bankruptcy practice group and our litigators to evaluate the effect of extrinsic changes on corporate structures or corporate creditworthiness.  In this way, we are able to provide the most strategically nuanced advice to our derivative clients as they forecast possible outcomes of complex restructuring, default or merger scenarios.

In non-U.S. financial markets, investors often employ a variety of financial instruments to gain access to, enhance leveragability of, or obtain favorable tax treatment compared to, the underlying equity securities, debt securities or loans.  We help our clients achieve these goals by designing and evaluating credit and equity-linked note transactions targeting credit risks or equity securities of Asian issuers.  We also advise our clients in the negotiations of equity swap master confirmations and other equity derivatives transactions.  Our expertise in U.S. securities laws and understanding of the regulatory and tax issues of our hedge fund clients, combined with our ability to identify local law issues and manage local counsel, helps us service our clients’ needs for derivatives advice in international markets.

Our hedge fund clients rely on us to negotiate comprehensive master agreements with trading counterparties and to keep them aware of developments in the derivatives market.  We provide experienced support and guidance in negotiating ISDA master agreements, collateral support documentation and customized prime brokerage arrangements.  We know the current market for negotiating changes to form documents, and we are focused on the underlying jurisdictional, tax, regulatory, compliance and bankruptcy issues that are important to our clients and that inform any negotiation of a long-term, comprehensive master agreement governing a trading relationship.  Since derivative products continue to evolve, and because similar products may be traded differently in different markets, we believe that a strong and continuing dialogue with our clients about the current state of the derivatives markets is an essential part of our representation.

Publications

• "CFTC Adopts 'Legal Segregation with Operational Commingling' Model for Treatment of Cleared Swaps Collateral" by Julia Lu and John A. Clark
• "MSHDA v. Lehman: Trying to Keep the Safe Harbor Safe for Swap Counterparties" by Neil Binder
• "Lehman Update: Derivatives Creditors File a Competing Plan" by Joon Hong
• "Material Non-Public Information in the Secondary Loan Market after Dodd-Frank" by Jon Kibbe and Michael Mann published in the LSTA 2011 Loan Market Chronicle

Presentations

• Jon Kibbe and Jennifer Grady present "Material Non-Public Information Best Practices" at LSTA 16th Annual Conference
• RK&O partners participate in the panel discussion "Receiving Information, Managing Risk, and Preserving Liquidity: Strategies for the Current Regulatory Landscape" at the Financial Services General Counsel Luncheon in San Francisco
• RK&O partners present "Receiving Information, Managing Risk and Preserving Liquidity: Strategies for the Current Regulatory Landscape" at the Alternative Asset Management General Counsel Luncheon in New York City
• Brian Fraser participates as a Panelist in a Compliance Rountable hosted by the LSTA

News & Announcements

• Louisa Watt quoted in the International Financing Review article "Europe edges towards claims market"
• Michael Friedman quoted in the Bloomberg article "Bankruptcy Turnarounds Menaced by Investor Valuation Fights, Lifland Says"
• Jon Kibbe quoted in The New York Times article "Pension Fraud in New Jersey Puts Focus on Illinois"