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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Wednesday, January 11, 2023

  • 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 enable finance counsel to structure a revolving credit financing where inventory is the collateral. The panel discussion will include attachment and perfection under the UCC, ensuring a continuing interest in proceeds upon sale, and how best to establish priority over competing security interests.

Faculty

Edwin E. Smith
Partner
Morgan, Lewis & Bockius LLP

Mr. Smith concentrates his practice in commercial law, debt financings, structured financings, workouts, bankruptcies, and international transactions. He is particularly knowledgeable on commercial law and insolvency matters, both domestic and cross-border. His representations have included those in major bankruptcies including Lehman and the City of Detroit. Mr. Smith often advises financial institutions on documentation and risk management issues.

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Steven O. Weise
Partner
Proskauer Rose LLP

Mr. Weise practices in all areas of commercial law and has extensive experience in financing, especially in those secured by personal property, including structured financing. He is regarded as one of the foremost authorities on Article 9 of the UCC. He is a member of the Permanent Editorial Board for the UCC and a member of the American Law Institute’s UCC Article 9 Drafting Committee. Mr. Weise is also the past chair of the American Bar Association’s Business Law Section Legal Opinions Committee.

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Anthony C. Cianciotti
Shareholder
Baker Donelson

Mr. Cianciotti helps banks, other commercial lenders, and borrowers structure, negotiate and close secured loan transactions. Clients rely on his attentive, client-centered approach to help navigate complex legal issues and find practical solutions to move transactions forward. A member of the Firm's Financial Services Transactions Group, he helps his clients provide or obtain the capital needed to support regional, national, and international businesses to succeed. His experience includes asset-based and cash-flow working capital facilities, equipment and acquisition financing, and venture debt and growth capital financing. He frequently advises clients in structuring credit agreements to allow for the financing of inventory manufactured outside the United States during the period that it is in transit to the United States. He has also helped develop novel, client-specific supply chain finance programs.

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Description

Lenders making asset-based loans often include a borrower's inventory as part of the borrowing base. Structured as a line of credit secured by the borrower's existing and after-acquired inventory and other assets, the loan balance is paid down as inventory is sold and can be redrawn to finance the production or acquisition of new inventory. Counsel must draft draw and repayment procedures with care.

The secured party will want a perfected security interest that takes priority over other security interests or other interests in the inventory. For a perfected security interest, there must be both creation and attachment of the security interest under a security agreement and perfection by filing a UCC financing statement, taking possession of the collateral, or some other method.

Competing security interests and liens can add complexity to the transaction. Generally, the time of filing establishes priority, but there are notable exceptions to the first to file rule, including manufacturers, other suppliers, or lenders with a purchase money security interest (PMSI). Counsel may wish to identify and address competing security interests and liens in loan and intercreditor agreements.

Listen as our authoritative panel examines issues particular to the financing of inventory. The panel will discuss critical provisions that should be included in the documentation of a revolving line of credit, perfecting and maintaining a first priority security interest in inventory, and dealing with competing security interests or other interests in the collateral.

Outline

  1. UCC treatment of inventory and other goods
  2. Documenting a revolving line of credit secured by inventory or other goods
    1. Loan agreement advance and repayment provisions
    2. Security agreement
    3. UCC financing statement
  3. UCC perfection and priority: searching and filing, possession or other methods
  4. Maintaining a security interest in proceeds
  5. Competing security interests and liens
    1. PMSIs
    2. Consigned inventory (both to and from the borrower)
    3. Landlord liens
    4. Warehouseman's liens
    5. Processor's liens

Benefits

The panel will review these and other critical issues:

  • What are the crucial components of a revolving line of credit when financing inventory?
  • How is a UCC security interest perfected in inventory and in proceeds after a sale?
  • What steps should counsel take to ensure priority over PMSI and other competing liens?