Tag Archives: Loan Transactions

What now for banks in the physical commodities sector?

Banks play an important business role in the physical commodities sector by providing the much needed access to capital and related risk management, including through: • extension of credit; • project finance; • market making and liquidity; • risk management and hedging; and • fostering competition. These services are especially important to small and medium-sized … Continue Reading

What’s in a Name? Amendments to the Uniform Fraudulent Transfer Act

On July 16, 2014, the Uniform Law Commission (the “Commission”) approved a series of discrete amendments to the Uniform Fraudulent Transfer Act (the “UFTA”) and renamed it the Uniform Voidable Transactions Act (the “UVTA”). The UVTA is intended to address inconsistency in the courts, better harmonize with the Bankruptcy Code and the Uniform Commercial Code … 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

Questioning the form: Moayedi v. Interstate 35

“Never blindly rely on forms and boilerplate terms – negotiating contracts is much more than just defending forms, even if you’re dealing with a “repeat” transaction“. In my few months as a secondee with Reed Smith’s Houston office, this is some of the best advise I’ve received from the partners with whom I work. The … 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

Commercial Tort Claims as Collateral

For those of you who have always wondered what a “commercial tort claim” is, and what to do when you have one, today’s the day you’ll get your answer. A commercial tort claim might arise when a corporate borrower has a claim that it can make against someone else for harm it has suffered.  For example, let’s … Continue Reading

The TOUSA Two-Step: Who Gets to Dance in Bankruptcy?

We've reported on the TOUSA case before (the first step of the two-step). This time, on appeal, the outcome is much less attractive to lenders. It seems that helping a company to avoid bankruptcy temporarily might not be enough "value" to merit requiring the company and its subsidiaries to grant new liens. Have we gone one step forward and two steps back?… Continue Reading

Anti-Assignment Provisions, Part Two – Legal Overrides

Following up on our last post, this time we'll take a look at the effect of the UCC on anti-assignment provisions in contracts. For example, if a license contains terms prohibiting assignment (and effectively prohibiting a lender from taking a security interest in the license), the UCC may override this prohibition and allow the lender to take and enforce a security interest in at least the right to receive payments under the license, if not more. This is good news for lenders. Read on to find out more.… Continue Reading

License Agreements as Collateral – Anti-Assignment Provisions and What to do About Them

In today's post we'll discuss a common issue that comes up in secured deals: anti-assignment restrictions on collateral. Let's start with a basic example: Our company is a licensee of a valuable software license that is integrated into its products that would not work without it. The licensor naturally wanted to control who held the license, so it prohibited any assignment of the license without the licensor's consent. Our company is borrowing money from a bank that wants to take a blanket security interest in all of the company's assets as a condition to the loan.… Continue Reading

The TOUSA Case – Not a Fraudulent Conveyance

If a subsidiary of the borrower guarantees your loan (and/or provides a lien or other support), do you have to show that the subsidiary received some of the proceeds of the loan in order to demonstrate that the subsidiary received "reasonably equivalent value" in the deal -- and that the deal wasn't a fraudulent conveyance? The TOUSA case give us an answer to this question.… 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
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