b'Who Says You Cant Right a Wrong?Managing Repo Wrong-Way RiskIn 2025, we advised bank clients on inno- From a commercial perspective, these vative repo transactions that involved thetransactions broaden the refinancing tool-saleoftheirownnotes,retainednotes,kit of financial institutions by diversifying under repurchase agreements for fundingfunding sources and potentially reduc-purposes. The notes were issued under theing funding costs. They enable the use of sellers medium-term note program andvaried asset pools, including otherwise illiq-retained by the seller to serve as purchaseduid assets, such as loan claims from project securities under the repo. As a result, thefinancings, commercial real estate, export buyer faced correlated credit exposurefinancings, and shipping and aviation, for to the seller and the retained notes, orfunding purposes. They also can facilitate wrong-way risk. We addressed this riskfunding in foreign currencies for sellers. For through an additional layer of collateralbuyers, they offer a secured financing option. securing the sellers obligations underCareful valuation and risk management of the transaction. The collateral packagesthe collateral package are critical, and buyer spanned assets governed by U.S., Englishrefinancing options should be assessed at an and German law and included, among oth- early stage.ers, revolving loan facilities, which posed specific valuation challenges. To accom-modateshortprepaymentrightsunder those facilities, the parties agreed a robust replenishment mechanism. These transac-tions were highly bespoke transactions that required adjustments to the standard Global MasterRepurchaseAgreement(GMRA) mechanics, including margining provisions that referenced changes in the market value of the additional collateral rather than in the purchased securities. Additional Early TerminationEventswereincorporated to capture deterioration in the value or eligibility of the collateral. Particular care was taken in defining secured obligations, security interests, and enforcement events to avoid spill-over effects to other GMRA transactions. Each documentation suite included a tailored set of representations, undertakings and covenants suited to the specific structures.10'