Private Credit And Secured Hedges — Drafting Issues To Avoid

Sept. 3, 2025 – This article addresses numerous drafting issues identified in New York-law governed direct lending transactions that have either caused borrowers to seek amendments or the presence of which have caused secured hedge providers to walk away from potential trades.

Trading desks are busy! Many leading financial institutions act as principals in trading activities, providing liquidity and credit quality for counterparties (Hedge Providers). These institutions have sophisticated teams that have long assisted their clients and customers in engineering cutting-edge hedging solutions in physical and financial trades. When seeking to execute a trade, time is of the essence. As one trader told the author, "All it takes is one social media post for the market to shift by 10 basis points between the morning and the afternoon." If a credit agreement is not properly drafted to permit secured hedges, significant time and expense may be incurred by a borrower to