LSTA Finalizes Distressed Buy-In/Sell-Out Provisions

On September 9, 2011, the Loan Syndications and Trading Association, Inc. ("LSTA") made effective a revised LSTA Distressed Trade Confirmation that incorporates a buy-in/sell-out ("BISO") mechanism for all distressed trades entered into on or after such date. The BISO provisions sets forth basic obligations that parties to a LSTA Distressed Trade Confirmation must comply with in order to settle a trade and deadlines for complying with such obligations.¹ A party that has timely performed such obligations may exercise certain remedies against a non-performing counterparty. Specifically, the new BISO provision allows a party to enter into a cover transaction (buy-in or sell-out, as the case may be), provided, it has first delivered a BISO notice to a non-performing counterparty and afforded such counterparty the prescribed time to cure such non-performance.