Instead, it sported the simpler attire of a lending transaction, redefining noteholders as lenders rather than investors.
Diving deep into the crux of the argument, Circuit Judge José Cabranes, penning the opinion, declared, “The notes are not securities,” pulling the rug from under Kirschner’s claims and ending the financial showdown.
Ripples in the Financial Waters
This case held the rapt attention of the financial behemoth, with many fearing a cataclysmic aftermath on the $2 trillion syndicated loans market.
The fear was palpable: a verdict in Kirschner’s corner could enslave the market to a labyrinth of costly state and federal securities obligations, turning the world of syndicated loans on its head.
Drawing on history, the Second Circuit, like detectives, examined the Federal Reserve’s 2013 guidance that painted the picture of expectations for banks jumping into the syndicated loan fray.
Armed with this historical backdrop and considering the loan’s collateral cushion, the Circuit confidently asserted the reduced risk to noteholders.
An Absent Advisor: The U.S. SEC
Raising eyebrows and adding another layer of intrigue, the U.S. Securities and Exchange Commission sidestepped a plea to offer its judgment on the burning question: Were the notes actually securities?
