Tag Archives: Secured Loans

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

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

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

This post was also written 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 from the fact … Continue Reading

Delaware Limited Liability Company Interests as Collateral

This post was also written by Aaron Bourke.  Most secured lenders have experience taking a security interest in limited liability company (“LLC”) interests.  Indeed, such arrangements are so common that lenders can easily fall into the trap of using shorthand (such as “membership interests”) to describe their collateral.  However, depending on the state of formation … 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

Negotiating Covenants in a Loan Agreement

What issues have you faced most often when trying to negotiate covenants in a loan agreement? Do you find that many of your negotiations are really about the tension between maintaining appropriate limits vs. providing sufficient flexibility for the business? Do specific issues arise in setting baskets for other debt, liens and investments? Permitting acquisitions? Agreeing on appropriate levels for financial covenants?… Continue Reading

Interest Rate Swaps: What to do When the Loan Agreement Terminates

Here's the story: A lender wants to refinance a loan made by another bank, and the other bank has provided an interest rate swap to the borrower. The problem is that the swap is "out of the money" -- meaning that, in this case, the borrower would owe the bank about $20 million if the swap were terminated today. Termination of the credit facility causes the swap to terminate too, so, unless we can come up with another option, this additional $20 million will be owed on the day the loan is refinanced. What can we do?… Continue Reading

Second Liens Really are Second

With the increase in corporate bankruptcy filings over the past year, there have been some interesting bankruptcy court decisions that affect those of us on the front end in corporate lending. One recent case took up the question of whether a second lien is truly second -- and whether it is safe to expect the terms of your intercreditor agreement to be enforced.… 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