Loan Market Association Buy-in/Sell-out “BISO” – why is it almost never used?

In 2005, the Loan Market Association (the LMA) adopted a mechanism to address delays in settlement of par trades called “BISO”, which stands for “Buy-in, Sellout”. This mechanism allows a party to an LMA par loan trade (a Party) to replace a loan trade which has not settled on a timely basis by entering into a substitute trade – either a buy-in from or a sell-out to a third party. Surprisingly, even with delay in loan settlement being such a critical current concern, this BISO mechanism is used very rarely. To determine why that is the case, it is necessary to consider the circumstances when the BISO mechanism applies, the procedure to be followed in invoking the BISO mechanism, the defences available against a Party’s resort to the BISO mechanism and the possible payment flows from invocation of the BISO mechanisms (including potential perverse outcomes). (Capitalised terms in this article are as used in the LMA Standard Terms.)

In November's edition of the Butterworths Journal of International Banking and Financial Law, Jacqueline Allen at Mandel Katz & Brosnan’s looks at BISO.

Click here to read the full article.