ISDA Advisory & Negotiation ISDA Agreements are complex and convoluted, and most businesses don’t negotiate them very often. Those that have negotiated an ISDA know that doing so can be complicated and involves facing a dealer bank with a specialized legal team, so hiring an industry expert is essential; but the process can be time-consuming and expensive. While expertise and experience are essential, it’s critical to have a partner who not only knows fair market terms but also understands the mechanics and logistics of a company’s hedging program, which dictates which terms are most important and drives what will have the most impact. Download This Bulletin

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Executive Summary On October 22, 2015, U.S. prudential regulators published final and interim final margin rules governing swaps that are not centrally cleared (the “PR margin rule”) and on December 16, 2015, the Commodity Futures Trading Commission published its corresponding final margin rules (the “CFTC margin rule” and together with the PR margin rule, the “Margin Rule”). The Margin Rule requires financial end users to back their uncleared OTC derivatives transactions with cash or liquid securities. Who is Affected? Financial end users that may face these requirements include private equity, real estate, infrastructure, and microfinance fund vehicles, as well as banks and insurance companies, among others. These Financial end users could face substantial new requirements mainly as a result of the variation margin (“VM”) obligations. In contrast, banks are not required to impose margin requirements on nonfinancial end users which…

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VIDEO: Portfolio Reconciliation Requirements Heather Fritzinger of Chatham Financial discusses the advantages of reconciling a portfolio of derivatives transactions with bank counterparties on a periodic basis. In addition, she explains which parties are required to reconcile trade portfolios under Dodd-Frank and EMIR, and describes how this reconciliation must be properly documented according to protocols published by the International Swaps and Derivatives Association (ISDA). A full transcription of the video is available below. window._wq = window._wq || []; _wq.push({ id: 'jw6sj1p4vw', onReady: function(video) { video.bind('play', function() { Munchkin.munchkinFunction('visitWebPage', { url: '/video/jw6sj1p4vw', params: 'video=started' }) }); video.bind('end', function() { Munchkin.munchkinFunction('visitWebPage', { url: '/video/jw6sj1p4vw', params: 'video=finished' }) }); }}); Video Transcript: Heather Fritzinger: The frequency of portfolio reconciliation varies by jurisdiction, and depends on two factors; entity classification and the number of trades between the counter parties. Under Dodd-Frank, swap dealers must make…

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VIDEO: Internal Compliance Under Dodd-Frank and EMIR Matt Hoffman of Chatham Financial answers your questions such as “What regulatory compliance obligations might my banks not help me with?”, and others regarding Dodd-Frank, EMIR regulations, and, in particular, the ISDA Dodd-Frank Protocols. Thanks for watching! window._wq = window._wq || []; _wq.push({ id: 'p8fztezb8b', onReady: function(video) { video.bind('play', function() { Munchkin.munchkinFunction('visitWebPage', { url: '/video/p8fztezb8b', params: 'video=started' }) }); video.bind('end', function() { Munchkin.munchkinFunction('visitWebPage', { url: '/video/p8fztezb8b', params: 'video=finished' }) }); }}); Video Transcript: Matthew Hoffman: When Dodd-Frank and EMIR first came online, we found that the buy-side of the over the counter market was concerned with continued access to that market asking us questions like, “What do I have to do for my banks to continue to trade with me?” This question really amounts to what do my banks need me to do…

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It’s amazing what you miss when you ignore social media for a few days. For example, take this declaration published in a recent article in the Minnesota Star Tribune: “The days when a convicted bank robber could get a job selling gold coins in Minnesota are coming to an end.” What? Over already? I only just learned that this is a thing! But alas, it’s true. It seems that unscrupulous numismatists are about as common as lakes up there in Minnesota, so much so that the state recently passed a law aiming to get the crooks out of the coin business. The new law shakes down around two central thrusts: regulate retail coin dealers, and formalize the transaction relationship. No longer can convicted felons pitch complete sets of American Silver Eagles as a retirement nest egg for Grandma. All dealers…

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Financial Institutions Case Study: Loan-level Hedging Our Client: A regional bank with an established hedging program. Situation: The bank was looking to expand its loan-level program under the supervision of a former derivatives marketer and had faced challenges on the accounting for its balance sheet derivatives. The bank called Chatham on the advice of its employee, who had prior interactions with Chatham in his former role as a counterparty to other Chatham clients. Summary: Chatham Financial assisted the bank by loading all of its existing trades into our proprietary system, including the balance sheet derivatives that needed accounting re-designations. Chatham reviewed the confirmations on all of the trades, along with the ISDA agreements with existing counterparties, to ensure appropriate terms and counterparty diversification. Chatham hosted management at Chatham’s campus to educate top officials on our turn-key approach to loan-level hedging,…

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Chatham’s expert advisory services and proprietary software solutions for real estate debt and derivatives not only serve global real estate investors, but also our clients’ key partners, including lenders, brokers, agency originators, auditors, loan servicers, and legal counsel. Chatham collaborates among all partners to ensure details are in order for a smooth closing. This involves considerations on hedging, defeasance execution, best treatment for hedge accounting, specifics on derivatives regulatory compliance, and negotiation of ISDA and related documentation. Our independent, unbiased perspective, market-proven models and methodologies, and proprietary SaaS platform make Chatham Financial the authority in debt and derivatives practices serving real estate clients and their business partners.

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Earnings volatility is a key concern for Real Estate Investment Trusts. With the need to transparently communicate to stockholders, investors and partners, along with obligations for SEC filings, REITs demand effective capital markets strategies and efficient treasury management solutions. Whatever the composition of the portfolio, REITs must manage their assets with a high degree of precision. Chatham serves Equity and Mortgage REITs with an understanding of the needs of both non-financial and financial entity companies. We work with REITs for interest rate and foreign currency hedging and hedge accounting, with an eye on compliance under Dodd-Frank and how legal requirements, like ISDAs, should be negotiated. As a trusted member of finance and treasury teams, Chatham supplies expert advice, practical processes and software solutions to help manage regular activities such as loan management and debt valuation. We also help navigate critical…

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Solutions to mitigate interest rate volatility Whether it’s a real estate project or a portfolio of properties, there are inevitable questions about how to protect against changes in interest rates. What should be your fixed vs. floating debt ratio? Is there a lender-required cap or swap? What is your refinance risk? What about fair ISDA terms and derivatives regulation like Dodd-Frank? Chatham Financial has the right answers for real estate investors. We are an independent firm specializing in capital markets and trading expertise. Our services are designed to reduce burdens on resources, save time, and bring transparency to complex transactions. How Chatham helps reduce interest rate risk Tailored risk assessment and analysis: Chatham Financial has helped manage interest rate risk for real estate investors for over 20 years. Each solution involves analyzing the underlying exposure and evaluating hedging alternatives. Whether…

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Managing interest rate risk as a factor of ROI Significant debt at a portfolio company increases the risk of interest rate volatility. This can significantly impact EBITDA. Hedging interest rate exposure helps offset this risk and reduces the potential of earnings volatility due to rate fluctuations. Chatham Financial assists clients in managing such exposure as well as the impact on returns by such potential business events as IPOs and re-financings. How Chatham helps manage the risk of interest rate fluctuations Risk assessment and analysis: Chatham works with sponsors and their portfolio companies to determine optimum hedging strategies. We analyze potential unhedged exposure and evaluate hedging alternatives and breakage scenarios. Our deep insight into market trends includes preferred structures, tenor, and hedge ratios. Hedge accounting treatment: Hedge accounting treatment is not an afterthought for Chatham. Our deep expertise in the standards…

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