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LSTA Says No to Price Disclosure

The Committee on Rules of Practice and Procedure has proposed an amendment to a bankruptcy rule that could have profound implications for the market for distressed loans, trade claims and securities, the Loan Syndications and Trading Association (LSTA) said.

The proposed amendment would require any party representing more than one creditor, any ad hoc committee and any indenture trustee in a bankruptcy case to fully disclose its short and synthetic positions, including derivatives, for each creditor represented in the group. In addition, if the court or another party requests it, each party must disclose the price of their holdings and the dates in which they entered into the transaction.

It is this second requirement that irks the LSTA. “While the LSTA supports the Rules Committee’s proposal insofar as it requires ‘position reporting,’ it strongly opposes that part of the proposal that would compel price or trade date disclosure,” The LSTA said in a memo. “The LSTA believes that price and trade date information represent highly confidential, proprietary information that is not relevant in the context of a bankruptcy case. The LSTA further believes that disclosure of such information would disadvantage creditors and dissuade them from getting involved in bankruptcy cases.”

The Rules Committee has requested comments on its proposal, and the LSTA said it will submit before the Feb. 16 deadline. In its memo, the LSTA urged its members, including investment firms, banks and law firms, to consider testifying at the hearing.

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