Structuring International Lending Transactions: Mitigating Legal, Economic, and Political Risks
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
- work Practice Area
Banking and Finance
- event Date
Thursday, January 27, 2022
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will provide finance counsel with the tools to structure around legal, political, and economic risks encountered in cross-border lending. The panel will discuss choice of law provisions, foreign guarantors, exit strategies if access to collateral is impaired, credit default swaps, and more.
Mr. Bidwell is the co-chair of the Firm’s Opinions Committee. His practice is focused in the areas of international asset financing, banking, structured finance and insolvency. He represents lessees, lenders, developers, owners, underwriters and equity investors in infrastructure transactions. In addition, he represents major banks, domestic and foreign corporations, investment banks, and domestic and foreign lenders in a broad spectrum of financial transactions.
Mr. Santucci chairs the Firm's Capital Markets Group and co-chairs the REITs and Real Estate M+A Group. He focuses primarily on public and private securities offerings, corporate governance, securities law compliance, cross-border transactions, and mergers and acquisitions. In his active cross-border transactional practice, he regularly advises U.S. clients in outbound investments, international joint ventures and M&A, and is particularly attuned to the multi-jurisdictional issues that arise in cross-border investments, strategic alliances and business combinations.
Ms. Chin is a senior lawyer in corporate and commercial financing, with an emphasis on asset-based financing transactions. Clients have benefited from her experience in capital markets, project financing and leveraged leases, these include placement agents, issuers, lenders, lessees, lessors and equity investors. Such clients seek Ms. Chin's advice on leases involving aircraft, oil-drilling equipment, satellites and other equipment, and in projects involving cogeneration, waste-to-energy, alternative energy, hydroelectric and manufacturing facilities.
Cross-border lending has increased dramatically over the last few decades. There are political, economic, and legal risks associated with lending to foreign borrowers with foreign-based collateral. Structuring around these risks should be a threshold concern of finance counsel.
Choice of law provisions determine a contract's validity and interpret the contract's language if there is a dispute. The governing law in most international transactions has been either New York or English law, each considered sophisticated, stable, and predictable. Still, there may be reasons to choose local law depending on the transaction.
A lender to a borrower in a jurisdiction with high legal risk may require a U.S. affiliate to act as the named borrower or guarantor of the loan. The lender may also want to ensure that the guaranty is one of "payment" and not of "collection" since the latter requires a lender to exhaust all remedies against a borrower before obligating the guarantor to pay.
With secured loans, if the legal risk of a borrower's home country is high, lenders will often structure an "exit strategy" that is enforceable without reliance on the legal institutions of the borrower's jurisdiction. Where political risk is high, a lender may purchase insurance on a risky loan in political risk insurance or a credit default swap.
Listen as our authoritative panel discusses how to structure around various risks associated with cross-border lending. The panel will examine choice of law provisions, structuring for foreign collateral and foreign guarantors, credit default swaps, and other risk mitigation strategies.
- The rise of cross-border lending: current size and scope
- Legal, economic, and political risks of transacting business with foreign borrowers and collateral
- Measuring risk: sovereign ratings, other
- Structural solutions
- Choice of law
- U.S. or other low-risk borrower and guarantor
- Exit strategies for overseas collateral
- Credit default swaps and other "insurance"
- Partnering with government lenders
The panel will review these and other key issues:
- What are some of the legal and enforcement risks in cross-border financing?
- How might a lender gauge the political and economic climate in a particular country?
- What factors should be considered in drafting a choice of law provision?
- How should the financing be structured to allow for enforcement in the U.S. or other low-risk jurisdictions?
- What are some exit strategies counsel might include in loan documents where enforcement against foreign collateral is uncertain?
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