Swap Consulting :: Swap Documentation

Although swaps are governed by "standardized" ISDA documents, there are many nuances and provisions to account for and address. The current market environment has forced nearly every issuer and counterparty to scrutinize their current set of documents as we have encountered an unprecedented series of events with large dealer bankruptcies, insurer downgrades to well below acceptable levels, and widespread collateral posting due to an extreme decline in interest rates.

CDR generally spends more time on documentation than any other aspect of typical swap advisory services; after all, an issuer will be bound by these terms for the life of the transaction as well as any other swap governed by the same ISDA documents. We feel that “the devil is in the details” and we always make sure that we are comfortable with all terms from the issuer’s perspective. The primary business points that should be emphasized include, but are not limited to the following:

Highly rated and/or high profile issuers have the distinct advantage of being able to better dictate the terms they desire within the documents, although documentation provisions have become more stringent in the current market environment as dealers have diminished appetite and ability to incur certain credit risks.

The terms and criteria outlined in these agreements should match the language specified in the issuer’s swap policy.