Hedging meaning

This checklist outlines the principal ISDA documentary points that should be considered during a financing transaction. Term sheet stage If acting for a borrower and specialist hedging advisers are engaged, obtain their input on the term sheet. If acting for a borrower, confirm the total pricing of the deal is clear (covering both the loan and the hedge). A borrower may pick a lender for a low loan margin, only to find that the swap credit spread from the same lender renders the overall economics less appealing than those from another lender. Are the loan and hedging set on an IBOR basis (eg EURIBOR) or on a risk free rate (eg SONIA or SOFR)? Does the lender require a zero floor in its loan? If acting for a borrower, ensure the borrower understands the consequences of any mismatch between this and the hedging documentation. ...

Checklist of key tax considerations relevant to share issues Structured as a table, this checklist clearly outlines key tax considerations specifically in respect of share issues...

In this issue: Banking and Finance case round-up Lending Security Debt capital markets Derivatives Regulation for derivatives lawyers Securitisation and structured products Restructuring Technology in banking & finance transactions Regulation for banking lawyers Scotland Daily and weekly news alerts New and updated content Useful information Banking and Finance case round-up Banking & Finance—November 2024 case round-up For a summary of the cases we flagged in Banking & Finance during October 2024, refer to News Analysis: Banking & Finance—November 2024 case round-up. Lending Re KRF Services (UK) Ltd [2024] EWHC 2978 (Ch) The judgment addressed a High Court application for an administration order, heard in that court, and centred on two key points of interest: (i) whether the sole director’s resolution to seek an administration order was effective; and (ii) the effect of the sanctions regime. On the first question, the court examined the company’s unamended Model...

There has traditionally been a misconception that gilt stewardship is not possible On 27 August 2024, the consultancy noted that LDI managers, as significant investors in UK government debt (often via bonds known as gilts), ought to actively engage with policymakers to address environmental breakdown. These managers deploy hedging techniques designed to protect pension schemes from swings in interest rates and rising or falling inflation. LCP also said that gilts now play an expanding role in defined benefit pension portfolios, and that trustees should press their LDI managers to set out and develop a stronger, more robust approach to engaging with government climate policy...

Sterling-linked gilt yields fell for a second straight day as investors rotated out of shares and into sovereign debt or gold, following the US government’s 2 April 2025 declaration of sweeping tariff hikes. When bond prices climb, yields contract. The UK’s defined benefit pension schemes hold substantial gilts, and the steady rise in yields over the past five years has produced unprecedented improvements in funding for retirement plans, underpinned by higher interest income from their bond portfolios. By the morning of 4 April 2025, the ten-year gilt yield had slipped to 4.35%, from 4.48% a week earlier, amid continuing fallout across financial markets. Even so, specialists said schemes have probably allowed for those shifts within their investment strategies...

The most common reasons for entering into derivatives are for the purposes of: Speculation — when a party seeks exposure to a given variable, for example taking a view on a commodity’s future price on the assumption it will rise or fall over a chosen period Hedging — aiming to offset exposure to the risk of an unfavourable shift in a variable, or to stabilise expected outcomes over time Arbitrage — seeking to take advantage of price discrepancies (between markets, or within the same market over time) to earn profit or cut costs, or where one participant can reach a price or market unavailable to another, including where prices differ over time Exposure to asset classes — obtaining access to a target market (eg commodities, shares, property) without incurring the expense, complexity and formalities associated with those markets, avoiding the same costs and complications Derivatives are commonly used alongside lending arrangements for hedging purposes in practice. In this context, the primary...

Real estate finance (REF) transactions REF deals fall into two categories: investment finance and development finance. The difference depends on whether the property is bought as an investment that already produces income, or acquired with the intention that it will be developed. Investment finance transactions are encountered more frequently than development finance transactions. For a general introduction to investment facilities in real estate finance, see the following Practice Notes: Introduction to real estate finance—the lending structure Real estate finance—investment facilities—key features The Loan Market Association (LMA) has issued a recommended form of facility agreement for real estate finance investment transactions, accompanied by a user guide. Both are available to LMA members—see the Single Currency Term Facility Agreement for Real Estate Finance Multi-property Investment Transactions (LMA REF Investment Facility Agreement) and the related user guide on the LMA website. Real estate finance transactions can differ markedly, and the LMA acknowledges in its user guide that producing a genuine ‘standard form’ document for...

This Practice Note sets out the applicable product governance obligations under the Markets in Financial Instruments Directive (Directive 2014/65/EU) (MiFID II) that firms must observe and comply with when designing, approving, marketing and overseeing the ongoing management of products throughout their entire lifecycle. It also summarises the relevant delegated acts adopted by the European Commission—particularly Articles 9 and 10 of Directive (EU) 2017/593 (the MiFID II Delegated Directive)—as well as the guidelines issued by the European Securities and Markets Authority (ESMA). Background to MiFID II and product governance The recast Markets in Financial Instruments Directive (Directive 2014/65/EU) (MiFID II), together with the Markets in Financial Instruments Regulation (Regulation (EU) 600/2014) (MiFIR) (collectively, the MiFID II framework), entered into force on 2 July 2014. The bulk of the framework’s provisions largely applied from 3 January 2018. MiFID II establishes a suite of product governance requirements so that firms manufacture and distribute products in a manner that ensures they act in clients’ best interests across every stage of the lifecycle...

This Agreement is entered into on [ insert date of agreement ] between the following parties: [ insert name of company ] (registered number [ insert registered number of company ]), with its registered office at [ insert registered address of company ] (the Company); and [ insert name of shareholder ] of [ insert address of shareholder ] (the Shareholder). Background (A) The Shareholder is the registered holder of [ insert number of shares ] [ insert class of shares ] in the Company. (B) The Company [ operates OR intends to operate ] the [ Insert the name of the employee share plan that the Company operates ] (the Plan), under which rights to acquire certain shares in the Company's capital [ have been granted OR will be granted ] by the Company. (C) The Company has asked the Shareholder to enable the acquisition of shares in the Company by, or for the benefit of, current...