Rendering Structured Finance Opinions of Counsel: Substantive Consolidation, Authority to File Bankruptcy, and More
Navigating Assumptions, Qualifications, Limitations and Use of Letters; Reducing Risks for Opinion Givers

Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Banking and Finance
- event Date
Tuesday, April 2, 2024
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
-
This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will provide commercial finance counsel with a review of the use of opinion letters in structured finance transactions, explain various elements of the opinions, and outline best practices for the opinion giver to minimize risks. The course will focus in particular on true sale and substantive non-consolidation opinions, which are generally considered essential in transactions involving the securitization of financial assets.
Faculty

Mr. Antonoff represents banks, non-banks and other direct lenders, alternative investment funds, private equity firms, asset managers, trade creditors and other parties in bankruptcy proceedings and out-of-court workouts including restructuring illiquid assets such as art, real estate, aircraft, and marine. He has an active practice in litigation finance, advising funders on structuring and documenting transactions as well as navigating ethical and professional responsibility issues. Mr. Antonoff advises hedge providers on commodity derivatives under ISDA documentation arising in energy company bankruptcy cases. He also has significant experience in intercreditor disputes and defending parties in preference and fraudulent transfer litigation. Mr. Antonoff regularly publishes topical articles, speaks at legal education seminars, and provides commentary for print and broadcast media.

Mr. Wolson specializes in derivatives, structured finance/securitization, finance and securities matters. His experience includes asset-backed securities (ABS) of various types, collateralized loan obligations (CLOs), mortgage-backed securities (MBS), collateralized debt obligations (CDOs), credit default swaps (CDS), interest rate swaps, credit-linked notes (CLNs), repurchase ("repo") agreements and securities fraud. He is the former Chairman of the Structured Finance Committee of the New York City Bar Association and is often called upon to participate in or moderate various seminars. Mr. Wolson has served as expert witness and/or consultant in approximately 60 cases involving, among other things, securities of various types, including CDOs and MBS; derivatives of various types, including CDS, interest rate swaps and currency swaps; legal malpractice and conflicts of interest; and loan agreements.

For over 25 years, Mr. Dubin served as Chairman of the firm’s Committee on Opinion Letters Rendered in Commercial Transactions. He regularly represents institutional lenders and borrowers in loan transactions (including financings of receivables for government contractors), restructurings of problem financings (he has appeared in bankruptcy court on behalf of both creditors and debtors), and asset securitizations. Mr. Dubin routinely delivers substantive non-consolidation opinions and true sale opinions in various structured financing transactions, both for clients for whom the firm is handling the underlying transactions and for clients of other firms that look to his for his specialized knowledge in these areas. He frequently lectures on commercial law topics, with specific emphasis on secured transactions, fraudulent conveyances, negotiable instruments, letters of credit, and other issues arising under the Uniform Commercial Code. Mr. Dubin is an Adjunct Professor at the George Washington University Law School, teaching Secured Transactions.
Description
The key concept for structured finance is the isolation of the financed assets in a "bankruptcy remote" special purpose vehicle (SPV). SPVs are frequently formed as LLCs and statutory trusts, particularly Delaware Statutory Trusts. The basic concept is that, once the financed assets have been transferred to an SPV, purchasers of securities (whether debt or equity) issued by the SPV should no longer be concerned about the credit risks of the former owner of the financed assets (usually the entity that originated the financed assets), the entity that formed the SPV, or other affiliates of the entity that formed the SPV.
The isolation of the financed assets is achieved by two fundamental structuring techniques. First, the transfer of the financed assets to the SPV must be a "true sale." Second, the SPV itself must be "bankruptcy remote."
A true sale opinion is a reasoned analysis that addresses--but of course cannot establish--that the transfer of the financed assets is a transfer of the complete ownership in consideration of whatever the SPV pays to the transferor. The alternative would be the grant of a lien or security interest in the financed assets as collateral for a loan made by the SPV to the transferor.
A substantive non-consolidation opinion addresses--but of course cannot establish--that the bankruptcy of the parent entity of the SPV (and usually certain other affiliates) would not result in the substantive consolidation of the assets and liabilities of the SPV with those of the parent (and, if applicable, the other affiliates).
If the isolation of the financed assets is successful, then, for example, if the parent of the SPV were to enter bankruptcy, the parent's bankruptcy estate would own only the equity interest in the SPV and have no continuing interest in the financed assets. In other words, the SPV, and only the SPV, would be the owner of the financed assets, and therefore the purchasers of securities issued by the SPV would be unaffected by the bankruptcy of the SPV's parent (or, if a different party, the bankruptcy of the former owner of the financed assets).
Listen as our authoritative panel of practitioners discusses drafting opinions of counsel in structured finance transactions with particular emphasis on rendering true sale opinions and substantive non-consolidation opinions, and best practices for the opinion giver to minimize risks.
Outline
- Overview: Why structured finance?
- Borrower perspective
- Lender perspective
- Certain characteristics of entity
- Mechanisms to prevent dissolution
- Bankruptcy remoteness
- Ownership of only the financed assets
- Restrictions on scope of business activities to ownership and collection of financed assets
- Requirement for independent director or manager to authorize bankruptcy
- Efficacy of limitations on authority to file for bankruptcy
- “Reasoned” opinion letters
- Substantive non-consolidation
- True sale
- Assumptions, qualifications, exclusions, and reliance
Benefits
The panel will review these and other key issues:
- How should the opinion giver address the issue of bankruptcy remoteness--what are the limitations, assumptions, and qualifications that the opinion giver should consider?
- What key issues should the opinion giver address in a substantive non-consolidation opinion?
- What key issues should the opinion giver address in a true sale opinion?
- What are the bankruptcy risks for parties providing financing to a structured finance SPV?
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