A trade group representing the $1.4 trillion leveraged loan market is urging U.S. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and other agency heads to back the status quo of excluding loans from securities laws. The LSTA, an industry group for syndicated corporate loans, penned a letter this week warning that defining loans as securities could affect market liquidity and raise costs for corporate borrowers, who are already wrestling with higher interest rates after the Fed’s most aggressive monetary tightening in a generation. “These increased costs and heightened regulatory uncertainty would come at precisely the wrong time for the domestic economy and the borrowers that depend on access to the syndicated term loan market,” the LSTA said in a letter signed by Elliot Ganz, the group’s head of advocacy. The letter comes at a crucial moment for the industry, with the Securities and Exchange Commission set to deliver an opinion on the matter by the end of June in a court case centered on the categorization of leveraged loans. The court’s final decision stands to have sweeping consequences for the market, leading the LSTA to seek input from potentially more sympathetic agencies than the investor-focused SEC. The LSTA’s letter was addressed to Yellen, Powell, Acting Comptroller of the Currency Michael Hsu and Federal Deposit Insurance Corp. Chairman Martin Gruenberg.
