As most market participants are aware, the Dodd-Frank rule
requiring all swap guarantors to be eligible contract participants
("ECP"s) under the Commodity Exchange Act
("CEA") became effective on March 31,
2013. Six months after effectiveness, lenders continue
to address ECP issues under existing documents, and should be sure
they are properly protected under new agreements.
A Summary of the Rule and ECPs
Under the new Dodd-Frank rule, all parties to swaps that are not
executed on a registered exchange must be ECPs under the CEA.
ECPs are (generally) entities with more than $10 million in total
assets.
It is common for lenders under credit facilities to provide
swaps to borrowers. Oftentimes, the swap obligations will be
part of the defined term "Obligations" under the credit
documents, which are in turn all secured by pledged collateral and
guaranteed by affiliates of the borrower. However, under the
new rules, if "Obligations" includes the
