Jurisdiction(s):
United Kingdom

Key definition

Basket definition

What does Basket mean? Basket describes a quantified carve‑out in negative undertakings (negative covenants) in loan or bond documentation (commonly LMA‑based facilities agreements) that permits the borrower group to do something otherwise restricted—such as incur financial indebtedness, grant security, make acquisitions or investments, dispose of assets, or make restricted payments—up to a specified limit. It is a market term, not defined by legislation or case law, and its usage is broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland. A hard cap basket sets a fixed monetary or percentage limit for a period or the life of the facilities. A soft cap...

Total return swaps (TRS) in the UK: structure, classification, parties, advantages/risks, SFTR investor transparency and ISDA documentation

Published by a LexisNexis Banking & Finance expert

Practice notes

What does this Practice Note cover?

This Practice Note outlines the principal aspects of a total return (or total rate of return) swap (TRS), including:

what a TRS is
how it is classified
who enters into a TRS, and
how to document a TRS

What is a total return swap?

A TRS is a derivatives agreement through which one party transfers the complete economic performance, including income from interest and fees, gains and losses arising from price movements, and credit losses, of a reference obligation to another party. TRSs may replicate the effect of securities financing transactions (SFTs)—they can function as synthetic repo instruments for funding purposes. SFTs and TRSs are used extensively by managers of collective investment undertakings to obtain exposure to certain strategies or enhance their returns. A TRS is an Over-the-counter, off balance sheet transaction. One participant, the total return payer (the TRS payer or ‘beneficiary’), will pay to the other participant, the total return receiver (the TRS receiver or ‘guarantor’), the actual income (or rate of return) on the underlying asset(s) (known as the reference asset(s)) and any change in the market value of the reference assets where there is capital appreciation...

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Web page updated on 22/05/2026

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