Standardised documents are the key to unlocking growth in LatAm loans

11 Aug 2017


The LSTA’s mission in Latin America is to boost primary lending and inject liquidity into the secondary market. Standardised documents and education are central to this aim, says the LSTA’s Bridget Marsh

Euromoney Conferences: What is the LSTA’s mission in Latin America?

Bridget Marsh: Our mission is twofold. First, to develop products for the primary and secondary loan market that will help to promote efficiency and boost liquidity. Second, education. We want to launch an outreach programme that connects directly with market participants in the region, where we can give advice and get feedback. Like so many industries, the loan market is increasingly global. And Latin America has big potential. The LSTA hopes it can play a small part in helping to put the necessary building blocks in place to enable that growth across the region.

Euromoney Conferences: How has syndicated loan documentation historically been applied in Latin America’s corporate loan market, and why is it in need of change?

Bridget Marsh: We found that people who traded New York-law-governed loans made to Latin American borrowers were modifying the LSTA’s US loan trade confirmation to create instruments specifically tailored for each Latin American trade - a time-consuming and expensive process that did not foster a more liquid market. They were also settling those loan trades on a modified LSTA participation agreement, which also had to be adapted for each trade. It wasn’t that the documentation used for those trades was in need of change; rather, a standard document would bring greater uniformity to the traded asset. This would promote efficiency and improve liquidity in the market.

Euromoney Conferences: How well-informed on documentation are Latin America’s market participants compared with other emerging markets?

Bridget Marsh: They are very sophisticated. When meeting with market participants in Lima last year, I was very impressed with their knowledge of New York-law-governed loan documentation, deal structures, and trends. And by the sophistication of certain investors. I learnt a lot about the local insolvency regimes, tax laws, and other regulations that either fostered or limited investor involvement in the markets. We’re excited to go to Mexico City in October to meet banks, investors, and lawyers there. Now, if we can simply get more lending to happen...

Euromoney Conferences: What advantages do loans have over bonds and other asset-classes in Latin America?

Bridget Marsh: Like US loans, New York-law-governed loans made to borrowers in Latin America are also typically senior secured floating rate loans. This means they offer issuers a more affordable way to borrow money with no prepayment premium like bonds. And for lenders, they typically offer attractive risk-adjusted returns relative to bonds.

Euromoney Conferences: How are you helping to promote transparency and efficiency in Latin America?

Bridget Marsh: A more transparent and efficient market should be the desired goal for all traded assets, not just in Latin America. We’ve published several important documents that have helped to simplify cross-border transactions in the region, and make secondary trading of the loans easier and quicker.

Euromoney Conferences: What are you hoping conference attendees will discover during your 'target table' discussion at the event?

Bridget Marsh: I hope they’ll get a better understanding of the LSTA and the advantages of embracing LSTA loan trading products and practices. For example, some may be surprised to discover that our documents include an arbitration provision which was fully supported by the members of our working group. Under this provision, parties may choose to have any trade dispute determined by arbitration, administered by the International Centre for Dispute Resolution in accordance with its International Arbitration Rules, with the place of arbitration in either Miami or New York.

Bridget will confront the need for enhanced loan documentation during her ''target table' discussion at the Euromoney Latin America Syndicated Loans Conference, taking place 28th and 29th September in Miami. Find out more on the event webpage, here.

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