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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

    Thursday, February 11, 2021

  • 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 analyze the structuring and documentation of prepayment transactions utilized in the commodities markets by purchasers and suppliers. The panel will discuss the benefits of prepayment structures and strategies for mitigating the associated risks.

Faculty

Scott Le Bouef
Partner
Strooch, Strooch & Lavay

Mr. Le Bouef is a member of the firm's Commodities and Derivatives Group. He represents clients in a wide variety of commodities and derivatives transactions, with a focus on energy commodities. Mr. Le Bouef advises investment banks, brokers, energy and commodity trading houses, hedge funds, producers, suppliers, and end-users on a wide range of commodities and derivatives transactions and related regulatory matters. He has extensive experience with the structuring and negotiation of purchase and sale agreements, intermediation arrangements, physically and financially settled hedge transactions, energy management agreements, tolling agreements, supply and off-take agreements, transportation agreements and storage agreements, whether such agreements are entered into on a stand-alone basis or in the context of project acquisitions or project development.

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Alex Cota
Partner
Paul Hastings, LLP

Mr. Cota is a partner in the Financial Restructuring practice at Paul Hastings and is based in the firm’s New York office. He advises and represents banks, private equity and hedge funds, business development companies, alternative capital providers, other financial institutions and private companies on a variety of complex financing transactions across a broad variety of industries and in all levels of the capital structure, both lender-side and borrower-side (including administrative agent and arranger representations).

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Brian R. Rogers
Attorney
Strooch, Strooch & Lavay

Mr. Rogers advises hedge funds, private equity funds, financial institutions, and private companies in a variety of debt financing transactions in all levels of the capital structure, including leveraged buyouts, restructurings, rescue financings and other special situation transactions. His practice also includes a focus on structured transactions involving commodities and derivatives.

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Description

Prepayment transactions are utilized to provide working capital in connection with the purchase and delivery of oil and gas, metals, and other commodities. Prepayment transactions provide a working capital solution for suppliers who lack a large balance sheet or access to other capital sources, particularly in distressed markets. Counsel to the working capital provider must be prepared to structure and document the transaction to address credit (including collateral and intercreditor considerations) and other risks associated with the purchaser's advance of funds (or other credit support) to the supplier.

Typically, there are two documents central to the transaction, which sometimes are combined into one agreement. The commercial contract (or sale contract or offtake agreement) provides the quantity and specifications of the product to be supplied, pricing and terms of delivery, and provisions for insurance and transfer of title. The prepayment (or advance payment or collateral) agreement includes any security, credit support, or other conditions which must first be satisfied before payment is made, and how the advance of the prepayment is repaid (typically by delivery of the product).

Deal terms can be complicated by factors such as the supplier's perceived risk, issues inherent in the industry sector, and any political, currency, or other risks associated with the country where the supplier and product is located. Care must be taken to ensure that both pieces of the transaction work seamlessly together.

Listen as our authoritative panel, consisting of Scott Le Bouef, Alex Cota, and Brian Rogers, discusses the mechanics and documentation of prepayment transactions.

Outline

  1. Advantages and risks associated with prepayment transactions
  2. Common structures
  3. Documenting the transaction
    1. Commercial contract (or sale contract or offtake agreement)
    2. Prepayment or advance payment agreement
    3. Transfer of title
  4. Mitigating risk
    1. Credit insurance
    2. Domestic bank guarantees or standby letters of credit
    3. Security interest in assets of the supplier
    4. Financial and other negative covenants
    5. Intercreditor Issues

Benefits

The panel will review these and other critical issues:

  • What are the advantages of prepayment transactions for a supplier or purchaser/working capital provider?
  • What are the key terms of the principal agreements?
  • How is the prepayment by the purchaser documented, and what are the primary concerns?
  • What are the most common forms of collateral and other credit support?