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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Thursday, September 19, 2024

  • 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
CLE
ALL

This CLE course will discuss liability management transactions currently being employed in the syndicated loan market, including "drop-down" and "uptiering" structures and how lenders might respond to these financing maneuvers. The panel will focus on liability management transaction issues highlighted in recent cases and elements of credit agreement covenants that a lender needs to consider in order to address these transactions.

Faculty

Valerie S. Mason
Member
Otterbourg P.C.

Ms. Mason is a member of the Banking and Finance department and Co-Chair of the Lender Finance practice group.  Her practice focuses primarily on the representation of domestic and foreign banks, commercial finance companies, and hedge funds, in the structuring and restructuring of financing transactions, including revolving credit facilities and term loans for acquisitions, refinancings, and restructurings and general working capital needs, workout arrangements, acquisition financing, lender finance transactions, Chapter 11 debtor-in-possession and “exit” financing facilities and other secured lending  transactions.

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David W. Morse
Partner
Otterbourg P.C.

Mr. Morse is member of the firm and presently co-chair of the firm's finance practice group.  He represents banks, private debt funds, commercial finance companies and other institutional lenders in structuring and documenting loan transactions, as well as loan workouts and restructurings. He has worked on numerous financing transactions confronting a wide range of legal issues raised by Federal, state and international laws.

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Alison R. Manzer
Partner
Cassels Brock & Blackwell LLP

Dr. Manzer is a partner in the Banking & Specialty Finance Group and Business Law practice. She has developed expertise in a wide range of practice areas combining skills to work effectively in most corporate/commercial practice areas, with a focus on financial services and structured transactions. Her recent experience includes block chain and fintech applications. Her cross-border expertise has led to several leadership roles in leading U.S. business law organizations such as the American College of Commercial Finance Lawyers and the American Bar Association. Dr. Manzer has written many books on legal topics, primarily in areas of banking and specialized finance, and routinely lectures and speaks on a wide range of topics.

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Description

Liability management exercises have become more commonplace, and typically take the form of either drop-down financings or uptiering transactions, although other variations have emerged. Each type of these transactions involves complex structuring techniques that provide additional avenues of leverage for borrowers but can negatively affect the expectations and rights of existing lenders.

In a typical drop-down structure, the borrower forms and transfers assets to a subsidiary, allowing the subsidiary to incur new debt secured by the contributed assets. This alters the lien position of existing lenders who may have assumed they had a first priority claim to assets that have now been transferred to the subsidiary.

In the uptiering transaction structure, the borrower incurs new debt provided by a group of lenders, usually a subset of the existing lenders and sometimes the sponsor that owns the borrower. The existing debt of the participating lenders is exchanged for the new tranche of debt that “primes” the debt and/or liens of the other lenders. The result is that nonparticipating lenders are subordinated to the new tranche of debt.

Lead and participating lenders should carefully review loan documents to assess a borrower's ability to enter into subsequent liability management transactions. From the lenders' standpoint, the subordination of claims should be a "sacred right," requiring lender consent, as should the ability to amend not only specific pro-rata sharing provisions but amendments to allow transactions that would have the effect of impacting pro-rata sharing. With the evolution of the various alternative structures for liability management transactions, the drafting solutions to preserve lenders’ expectations as to the priority of their liens or debt have become even more complex.

Outline

  1. Emergence of liability management in the current syndicated loan market
  2. Drop-down financing
  3. Uptiering transactions
  4. Subordination issues and intercreditor relationships
  5. Documentation considerations: limitations on investments, unrestricted subsidiaries, waterfall, pro rata provisions, and "sacred rights"

Benefits

The panel will review these and other key issues:

  • How does drop-down financing impact the collateral position of existing lenders?
  • Are there circumstances in which an uptiering transaction might be beneficial to nonparticipating lenders?
  • When is an intercreditor agreement needed in connection with a liability management transaction? What are the key terms?
  • What "sacred rights" provisions would limit the borrower's ability to engage in liability management transactions?