If Loans Were Securities: The End of the World as We Know It?

Partner Jill Bronson spoke on “If Loans Were Securities: The End of the World as We Know It?” at the annual convention of Loan Syndications and Trading Association (LSTA) in New York on October 30, 2019. Jill’s panel was moderated by LSTA’s general counsel and chief of staff, Elliot Ganz, and included the SEC’s former acting chair and commissioner, Dr. Michael Piwowar.

The panel discussed the ramifications if a court were to rule that certain broadly syndicated term loans should be considered to be securities for the purposes of federal and state securities laws. While the immediate motivation for the discussion was Kirschner v. JPMorgan et al., a case in the U.S. District Court for the Southern District of New York arising out of the Millennium Health bankruptcy, the discussion was not about the case, but rather about what would be the effect of a ruling that such loans were securities. The panelists agreed that there are more questions than answers and such a ruling could have a disruptive effect on the loan market, both from the perspective of the financial institutions that have arranged these types of transactions and the large number of companies that have historically accessed this market. Jill discussed, among other things, the likely effect on bank execution processes, the economic impact of such a ruling and the special role that bank executions have historically played where securities issuances were not viable options for certain financing transactions.