In February, LSTA EVP Meredith Coffey sat down with the outgoing LSTA Executive Director Bram Smith and the incoming LSTA Executive Director Lee Shaiman to discuss the last 10 years … and what is on deck for the next 10.

MC: Bram, you joined the LSTA as Interim Executive Director on Sept. 2, 2008, just 13 days before Lehman Brothers collapsed. What were those early days like?

Bram Smith: It was a crazy time. While the near-collapse of Bear Stearns in the spring should have been a portent, no one expected Lehman would actually file for bankruptcy. The markets panicked as nothing like this had happened in living memory. In the loan market, the LSTA took several steps to mitigate the damage. As secondary loan prices tumbled toward 60 due to technicals not fundamentals, we issued an advisory reminding members that a depressed secondary price did not necessarily mean that a loan was distressed or should trade on distressed documentation. Since loans that trade on distressed documentation settle much more slowly, limiting the number of names trading distressed helped liquidity at a critical time.

Additionally, after Lehman filed for bankruptcy, the LSTA convinced the Lehman estate to accept or reject all their open loan trades quickly. If they hadn’t agreed to do that, hundreds of millions of dollars of unsettled loan trades could have been in limbo for years. We also convinced the creditors committee that LSTA-form loan participations were “true sales” and not unsecured loans to Lehman, which would have made them part of the estate (which is what happened to LMA participations). This, too, saved our members years of uncertainty and possible steep losses.