Swap Documentation in Real Estate Finance Transactions: Coordinating ISDA Master Agreement and Mortgage Terms

Documenting Covenants, Security, Required Consents, Voting and Control, Reporting, and Regulatory Issues

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


Conducted on Wednesday, July 29, 2020

Recorded event now available

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Program Materials

This CLE webinar will discuss the various uses of swaps and other derivative products to hedge risk in real estate finance transactions, how to integrate derivatives into loan documentation, and how to document the swap transaction to ensure there is consistency with the loan.

Description

Swaps and other derivatives are commonly used by borrowers and lenders to hedge against movement in market interest rates. The ISDA Master Agreement, Schedule, and a Confirmation together establish the relationship between borrower and swap provider and the economic and legal terms of the hedging transaction.

Loan and swap documentation must be aligned correctly to ensure that lenders are borrowers are in compliance with applicable laws and regulations, the loan collateral properly secures swap obligations (as applicable), there are no unintended economic effects on either side of the transaction, and the appropriate LIBOR fallback terms are in place, among other things. Loan counsel must ensure that loan documents sufficiently reflect the hedging transaction.

Counsel to swap parties must also understand the financial ramifications and regulatory framework of interest rate swaps to advise clients considering hedge transactions.

Listen as our authoritative panel of finance practitioners guides you through the use of swaps to hedge risk in real estate loan transactions and best practices for documenting both the swap transaction and the terms of the swap transaction in the loan documentation. The panel will also look at the impact of rising and falling rates on real estate borrowers, lenders, and swap market participants.

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Outline

  1. Introduction to hedging interest rate risk
  2. Swap documentation overview
    1. ISDA master agreement
    2. Schedule to the ISDA master agreement
    3. Confirmation
    4. Credit support annex
    5. Dodd-Frank regulatory terms
  3. Coordinating loan documents with the ISDA master agreement
    1. Securing hedging obligations
    2. Termination rights
    3. Complying with anti-tying laws
    4. Other common documentation pitfalls
  4. LIBOR phaseout --update
    1. Timing of transition away from LIBOR
    2. Overview of USD LIBOR replacement (SOFR)
    3. Model fallback terms

Benefits

The panel will review these and other key issues:

  • Current market trends for using derivatives to hedge risk in real estate loan transactions
  • Best practices for integrating derivatives into loan documentation
  • How to prepare for the LIBOR phaseout in both swap and loan documentation

Faculty

Fraser, Alexander
Alexander P. Fraser

Partner
Michael Best & Friedrich

Mr. Fraser serves as primary outside counsel to national, regional, and community banks on interest rate swaps, foreign...  |  Read More

Aaron, Cheryl
Cheryl L. Isaac

Senior Counsel
Michael Best & Friedrich

Ms. Isaac represents financial institutions, energy companies, and commodity trading firms (including both end-users...  |  Read More

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