Credit Derivatives: Mastering Key Legal and Documentation Issues

Minimizing Legal Risks Amid the Credit Market Crisis

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, April 10, 2008

Program Materials

Description

Over the past decade, credit derivatives have become a common instrument for shifting credit risk from one party to another without transferring the underlying credit. The credit derivatives market is estimated to have grown from $180 billion in 1996 to more than $20 trillion in 2006.

The current credit market crisis has brought heightened attention to the risks associated with credit derivatives. Regulators in the United States and overseas are worried that credit derivatives transactions may be poorly documented and risk management systems ineffective.

What are the best practices for counsel to advise clients in utilizing these transactions in order to minimize legal risks, particularly during the current credit market crisis?

Listen as our panel of corporate finance attorneys reviews the latest trends in the credit derivatives market, legal and documentation risks related to credit derivatives and strategies to minimize those risks.

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Outline

  1. Credit derivatives legal structure and current issues
    1. Overview of credit derivatives
    2. Derivatives vs. insurance
    3. LCDX Index and Tranche Trading
    4. Regulators’ concerns
  2. Documentation and operational risk issues
    1. Components of documentation—master agreements, collateral documentation, confirmations
    2. Definitions
    3. Successor issues
    4. Rating agency compliant ABS hedging provisions
    5. Automated settlement processes
  3. Exercising rights under credit derivatives
    1. Cash settlement vs. physical settlement
    2. Default and closeout provisions
    3. Proper and timely Credit Event Notices
    4. ISDA Protocol
    5. Counterparty credit risk

Benefits

The panel reviewed these and other key questions: 

  • What are the regulatory and operational risks of using credit derivatives?
  • What key documentation terms does counsel advising on credit derivatives need to understand?
  • How can counsel draft credit derivative contracts in a way that minimizes documentation and operational risks?

Faculty

Willa Cohen Bruckner
Willa Cohen Bruckner

Partner
Alston & Bird

She concentrates on derivatives, structured products, and alternative investments and has over 25 years of experience...  |  Read More

Geoffrey B. Goldman
Geoffrey B. Goldman
Partner
Shearman & Sterling

He has extensive experience with structuring and documenting credit derivatives and has represented industry groups in...  |  Read More

William D. Morris
William D. Morris
Partner
Akin Gump Strauss Hauer & Feld

He heads the firm's Derivatives Practice and represents more than 50 families of funds and several energy companies in...  |  Read More