Archives: Loan Transactions

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Revised Pennsylvania Statute Creates Power of Attorney Chaos

The Pennsylvania Legislature enacted extensive changes to Title 56 of the Decedents, Estates and Fiduciaries Code affecting powers of attorney, effective as of January 1, 2015. The amendments create a number of issues for creditors in commercial transactions and individuals and businesses engaging in the transfer of equity interests, bonds or other assets of a … Continue Reading

A $1.8 million Drafting Lesson

In a typical case of distressed borrower where the lender was left holding the unpaid debt bag,  the Fifth Circuit Court of Appeals chimed in on the hotly debated and litigated prepayment premiums litigation. In re Denver Merchandise Mart, 740 F.3d 1052 (5th Cir. 2014).  The lender was secured, with the accelerated $24 million note … Continue Reading

Lending in Latin America: Risks and Considerations (Part 2 of 2)

In the second and last part of the series (click here for Part 1) we introduce additional considerations and risks associated with lending in Latin American jurisdictions. As previously noted, our observations are based on our interactions with Latin American counsel on cross-border transactions and surveys. However, we are not members of the bar in … Continue Reading

Lending in Latin America: Risks and Considerations (Part 1 of 2)

Lending by lenders located in the United States to high-net-worth individuals located in Latin American jurisdictions has grown tremendously in the recent years and this trend is expected to continue. Although Latin American jurisdictions present unique opportunities for business expansion for US lenders, they also present risks and issues different from those in the United … Continue Reading

Comparing Agency Provisions in the United States and Europe

This post was written by Lee Ann Dillon, Helena Nathanson, Abbey Mansfield and Jordan M. Hook. The Loan Syndications and Trading Association (“LSTA”) provides model agency provisions that reflect standard market practice in the United Sates primary loan markets, while the Loan Market Association (“LMA”) provides model provisions reflecting market practices in the European markets. … Continue Reading

Negotiating Forward-Looking MAC Clauses: Addressing Borrowers’ and Lenders’ Divergent Interests in the Inclusion of “Prospects”

This post was written by Lee Ann Dillon, Abbey Mansfield and Jordan Hook. Material adverse change (“MAC”) or material adverse effect (“MAE”) clauses in Credit Agreements are used primarily as a condition precedent to closing and all borrowings, and the occurrence of a MAC or MAE may also constitute an event of default.  The MAC definition … Continue Reading

More on Capital Call Facilities: The European Perspective

This post was written by Abbey Mansfield. A few months ago we blogged about capital call facilities, including basics, challenges and opportunities from a U.S. law perspective.  As noted in that post, capital call (aka “subscription” or “equity bridge”) facilities have garnered attention recently due to their strong performance in the wake of the financial crisis. Today, we … Continue Reading

Avoiding the Unintended Tax Consequences of Foreign Subsidiary Pledges and Guarantees: A Look at Deemed Dividends in U.S. Loan Transactions

This post was written by Carol Burke and Jordan Hook with assistance from Abbey Mansfield . Overseas Shipping Group (“Overseas”) recently sued its former attorneys, a prominent New York-based law firm, for legal malpractice in drafting credit agreements that resulted in the company incurring an estimated $463 million in tax liability. The suit alleges that the tax liability arises … Continue Reading

Inbound Loans: An Opportunity for International Banks in the U.S.

This post was written by Lee Ann Dillon and Abbey Mansfield with assistance from Jordan Hook. Foreign and international banks are increasingly presented with opportunities to lend to the U.S. subsidiaries of their foreign clients through their U.S. branches.  These opportunities exist partially due to the fact that regulations abroad have constrained lending, and foreign parent companies … Continue Reading

Capital Call Facilities: Basics, Challenges and Opportunities

The capital call facility market is expected to continue its upward trajectory as lenders become more familiar with these facilities and the private equity market continues to recover from the financial crisis. As described in this post, lenders will face challenges in this expanding and changing market. However, lenders who are able to provide customized and creative solutions to their funds clients will view this as an opportunity and stand to benefit.… Continue Reading

6 Months Later, Lenders Continue To Address ECP Issues

As most market participants are aware, the Dodd-Frank rule requiring all swap guarantors to be eligible contract participants ("ECP"s) under the Commodity Exchange Act became effective on March 31, 2013. Six months after effectiveness, lenders continue to address ECP issues under existing documents, and should be sure they are properly protected under new agreements.… Continue Reading

Borrowers in Default — Part 2

In our last post, we explained that it's often the case that a borrower can certify that it's not in default (and can borrow money) if the quarter has not yet ended and there is still enough time for the company's performance to improve. This post, by my colleague Svetlana Attestatova, describes the cautionary tale of a case that went the other way -- where the court found that the borrower should not have certified that it wasn't in default, even though the quarter had not yet ended.… Continue Reading

Is the Borrower in Default? Sometimes It’s Hard to Tell

Let’s talk about borrowing money under revolving lines of credit.  Sometimes it’s not entirely clear whether the borrower is in default, and there’s a question as to whether they can borrow money.  Here are our facts:  The company needs to draw on its revolving line of credit, and it’s three weeks before the end of the fiscal … Continue Reading

Jury Trial Waivers – California is Just Different

I live in California, which (among many other things) is a state known for having some unusual laws. One oddity that comes up from time to time when negotiating loans is the fact that jury trial waivers - which are standard in most corporate loan agreements - are generally unenforceable in California. Thankfully, there are other means to get to a similar result. "Judicial reference" is one of them.… Continue Reading

False Financial Statements — Can You Rely on Representations from Your Borrower?

When you want to make a loan, you probably get copies of the borrower's recent financial statements, and you probably take a pretty close look at them as part of your credit process. You might even ask for more information about certain items that you see on the financial statements. But how often do you dig deeply behind the financial statements and conduct your own audit? Probably never, right? So what happens if the financial statements later turn out to be false?… Continue Reading

Loan Participations – To Consent or Not To Consent?

Here's an easy one for you: How many of you (lenders) think that you should have to get consent from the borrower to sell a participation in a loan? I'll take the safe bet and guess "none" -- since it's such standard practice for lenders to sell participations without borrower consent. Really, you'd be hard pressed to find a credit agreement that said otherwise. With that in mind, let's take a quick look at a recent case from a federal court in New York that said just the opposite.… Continue Reading

How to Avoid Lender Liability – Part 1

Back in the 80's and early 90's, there was a flurry of "lender liability" lawsuits, with lenders being sued when they exercised remedies after a default on a loan. By the mid 90's, these lawsuits appeared to have gone the way of the dinosaur -- but now they're back. What can you do to protect yourself against lender liability claims?… Continue Reading

DOE Loan Guarantee Program

The U.S. Department of Energy has a new program to guarantee loans to support the development of renewable energy projects.   Lenders who meet the DOE’s requirements for eligibility have been invited to submit applications for partial guarantees from the DOE for the financing of projects that will generate electricity or thermal energy, using commercial technology.   The loans must be structured as traditional senior secured … Continue Reading

Purchasing Loans of Failed Financial Institutions from the FDIC

When financial institutions fail, the FDIC steps in and seizes the assets of these institutions. The largest categories of assets held by a failed financial institution are its performing and non-performing loans. These loans are in the process of being sold to the public in bulk through a sealed bid process. This post explains how the sale process works, and tells how you can find information about the loans that are for sale.… Continue Reading
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