The Loan Syndications and Trading Association (the “LSTA”) scored a major victory in 2002 when New York adopted LSTA-sponsored legislation designed to make oral agreements to trade bank loans and claims arising from business debts legally binding. Since then, participants in both the syndicated loan market and the claims trading market have come to rely upon the idea that trades entered over the phone are binding, so long as the parties agreed to the material terms of the trade.
A 2014 Fifth Circuit Court of Appeals decision calls this assumption into question for loan trading, and a case that is currently pending in New York state court could extend the uncertainty to business debt claim trades as well.