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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Real Property - Finance

Date & Time
  • event Date

    Thursday, December 3, 2020

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will describe hedging transactions and ways to limit the parties' exposure to changes in rates in floating-rate transactions. The panel will explain the role of the hedge counterparty and discuss critical aspects of hedge documentation.

Faculty

Chrys A. Carey
Of Counsel
Morrison Foerster

Mr. Carey represents clients in a wide variety of derivatives transactions and advises them on derivatives regulatory and compliance issues. His clients include investment companies, hedge funds, foreign and domestic banks, central banks, multilateral development banks and corporate end-users. Mr. Carey negotiates ISDA Master Agreements and other trading documents, including prime brokerage documents, clearing and execution agreements and related collateral arrangements. He also advises his clients on a broad array of derivatives regulatory issues arising under the Commodity Exchange Act and the rules and regulations of the Commodity Futures Trading Commission.

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Aaron S. Marines
Partner
Russell Krafft & Gruber, LLP

Mr. Marines has served 16 years in private practice, focused on real estate and business matters. Residential and commercial developers rely on his years of experience working with zoning and land development, and the creation of condominiums, planned communities, and homeowners’ associations. His work includes complex projects such as mixed residential communities, mixed residential and commercial properties, leasehold condominiums and condominium conversions.

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Description

Floating-rate commercial mortgage loans present an interest rate risk for borrowers and lenders. Real estate projects typically generate relatively steady cash flow. Yet, the parties to the loan must have confidence that the cash flow will be sufficient to pay debt service regardless of increases in interest rates.

Many market participants employ hedges to limit exposure to interest rate risk, usually with rate caps, interest rate swaps, and collars. Real estate counsel must understand how these hedge transactions work and what financial risks they entail.

Listen as our authoritative panel discusses each of these derivatives and how they are priced and memorialized. They will address the required debt ratings for the swap counterparties and cap providers, the issues that arise when an institution's rating is downgraded, and the additional regulations imposed on derivatives under Dodd-Frank. Finally, they will summarize the real estate attorney's role in the hedge transaction.

Outline

  1. Overview of interest rate hedges
    1. Purpose: protection against changes in floating rate during loan term
    2. Caps, swaps, and collars
    3. Pricing and auctions
    4. Role of counterparty
    5. Need for collateral
  2. Interest rate hedge documentation
    1. Hedge term sheet/bid sheet
    2. Recorded phone call during which trade is executed
    3. Trade ticket
    4. Hedge confirmation
    5. ISDA Master Agreement
    6. Schedule to Master Agreement
    7. Impact of LIBOR transition
  3. Impact of Dodd-Frank regulations: eligible contract participant qualifications
  4. Role of borrower's and lender's counsel

Benefits

The panel will review these and other relevant issues:

  • What kind of interest hedge is appropriate for your transaction?
  • What are costs and risks associated with each type of hedge?
  • How are hedge transactions bid out, executed, and documented?
  • How are swap counterparties and cap providers currently regulated, and what are the qualification, clearing, and margin requirements for hedging transactions?
  • What is the role of real estate counsel in the hedge transaction?