BarbriSFCourseDetails
  1. keyboard_arrow_leftBack

Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Thursday, July 23, 2020

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00

This course is $0 with these passes:

CLE
ALL

This CLE course will examine the U.S. federal income tax issues associated with debt restructurings and workouts, including loan modifications, debt refinancings, and the acquisition of outstanding portfolio company debt, in today's challenging business environment. The panel will discuss planning techniques to address cancellation of indebtedness income (CODI) and other tax issues that can arise for borrowers and lenders in connection with such transactions.

Faculty

Mitchell A. Fagen
Attorney
Parent: Katten Muchin Rosenman Llp

Mr. Fagen helps his clients with tax planning. This includes helping businesses, financial institutions and other entities on tax issues related to asset-backed securitizations, residential and multifamily mortgage-backed securitizations, debt transactions, partnership tax matters, and corporate transactions, in both domestic and international contexts.

expand_circle_down Expand to View Full Bio expand_circle_up Collapse Bio
Todd Hatcher
Partner
Katten Muchin Rosenman LLP

Mr. Hatcher focuses on the US federal income tax law aspects of transactional matters, including representing publicly traded and privately held companies in both domestic and cross-border merger and acquisition transactions; negotiating private equity fund agreements and operating partnership agreements; negotiating credit and financing agreements; reviewing capital market debt and equity offering materials; and planning bankruptcy and insolvency restructurings.

expand_circle_down Expand to View Full Bio expand_circle_up Collapse Bio
Brandon D. Hadley
Partner
Katten Muchin Rosenman LLP

Mr. Hadley advises financial institutions and large middle market lenders in all types of debt transactions, including commercial finance, securitization and structured finance, and cross-border debt investments. With a national practice spanning more than 10 years, he assists his clients in managing tax risks and reducing tax costs. Mr. Hadley also helps clients with debt investments, securitizing assets and other capital markets transactions.

expand_circle_down Expand to View Full Bio expand_circle_up Collapse Bio

Description

Debt restructurings and workouts are becoming more and more prevalent in the current economic downturn and such transactions may result in significant federal income tax consequences, including CODI for the borrower and original issue discount (OID) income for the lender. Counsel should be aware of structuring alternatives and timing decisions that can affect the tax outcome.

A change in the interest rate, reduction of principal, an extension of the maturity date, or a deferral of interest (among other amendments) that constitutes a "significant modification" is treated as an exchange of the old debt instrument for a deemed new debt instrument, resulting in CODI if the issue price of the new debt is less than the adjusted issue price of the old debt. Similarly, if a borrower repurchases debt for less than the amount owed, it will recognize CODI. A deemed exchange may also result in the conversion of market discount into OID, which can result in "phantom" income for lenders.

Debt restructurings and workouts involving borrowers taxed as partnerships present special CODI concerns. Because of the pass-through tax treatment, a partnership in financial distress may want to consider converting to a corporation so that any bankruptcy or insolvency exclusion will apply at the entity level. Taxpayers should also carefully consider the timing of any restructuring transaction in light of the expanded ability to carryback NOLs under the CARES Act and the 80 percent limitation on the utilization of carryover NOLs (temporarily suspended by the CARES Act).

Listen as our authoritative panel examines the tax implications of restructuring and repurchasing existing debt. The panel will also discuss exclusions available under the tax code and strategies for avoiding or minimizing the tax consequences of these transactions.

Outline

  1. How amendments to debt instruments may cause CODI
  2. Mitigating the impact of CODI through applicable exclusions
  3. Application of CODI exclusions to insolvent/bankrupt partnerships and related structuring options
  4. Acquisition or refinancing of debt at a discount
  5. Other consequences of actual and deemed debt exchanges (fungibility, AHYDO, etc.)

Benefits

The panel will review these and other key issues:

  • What is a "significant modification" in the debt restructuring context and why might it result in CODI?
  • What are the bankruptcy and insolvency exclusions concerning CODI and how might they affect the parties' approach to a debt restructuring?
  • How does the CARES Act expansion of NOL carrybacks impact the restructure or repurchase strategy?
  • What are the special CODI concerns arising in partnership debt workouts?
  • What additional income tax problems can arise in connection with actual and deemed debt exchanges?