Archive for March 30th, 2012

New Fed Survey Shows Increased Market Demand for Third-Party Custodial Arrangements

For the past few months, a working group of the LSTA’s Trade Practices and Forms Committee has been debating changes to the form of Collateral Annex.  Sellers of loans on the secondary market use this form when their inability to obtain agent or borrower consent to a pending sale of loans requires them to close the sale on a participation basis.  The purpose of the form is to collateralize any ongoing funding obligations the purchasers may have.  The realities of transacting in a post-Lehman world have contributed to an increasingly vociferous call by buysiders for seller segregation, or third-party custody, of any cash collateral posted by purchasers under the Annex.

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