Term Loans, Credit Risk Transfers, and Credit Guaranties in Subscription Finance: Tailoring Loan Terms; Mitigating Risks

Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Banking and Finance
- event Date
Tuesday, December 10, 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 webinar will provide finance counsel with an understanding and overview of term loans, credit risk transfer (CRT) transactions and credit guaranties under current market conditions. The panel will explain how these subline facilities can be structured to complement conventional bank loans and provide borrowers with access to non-bank financing on less restrictive terms while also helping lenders reduce credit liabilities to create new lending opportunities.
Faculty

Ms. Lee has extensive experience in complicated financings designed to provide fund-level leverage to facilitate and support investment activities. She regularly advises various financial sponsors, asset managers, business development companies and other financial institutions on a wide variety of fund financing transactions, including: subscription (capital call) facilities secured by uncalled capital commitments and related rights, with borrowing base capacity for the fund, as well as its parallel funds, alternative investment vehicles and portfolio companies; unsecured demand lines with an uncalled capital coverage requirement; hybrid facilities; NAV facilities; asset-based revolvers and Loan-to-SPV financings; margin loans; fund guarantees of portfolio level investments; management lines provided to investment advisors for working capital purposes; and employee co-investment credit facilities secured by their fund interests.

Mr. Miller focuses his practice on novel and innovative structured financing solutions, with an emphasis on transactions that combine securitizations and derivatives. He regularly represents buy-side and sell-side institutions in connection with synthetic securitizations, credit-linked notes, credit default swaps (including tranched portfolio CDS), derivative product companies (DPCs) and other credit-risk transfer (CRT) products; cash securitizations of a wide range of asset classes, including fund interests (CFOs and rated feeders), corporate loans, receivables, municipal securities (tender option bonds), commercial and residential mortgages, intellectual property, automobile loans, and distressed and non-performing assets; repackaging and securitization transactions that utilize repurchase transactions or derivatives, such as currency swaps or total returns swaps (TRS), to transform the economic profile of, or achieve leveraged exposure to, repackaged or securitized assets; and the financing of risk retention interests in securitization transactions, among others. Mr. Miller is frequently called upon by clients to advise on securities law, UCC, bankruptcy, tax and other legal and regulatory issues. In addition, financial institutions routinely seek his counsel on contemporary issues facing the structured finance industry.
Description
With rising interest rates and increased capital requirements ahead under the Basel III Endgame, term loans have become a viable option for providing new liquidity and flexibility for borrowers and lenders. Typically, terms loans are a separate tranche that is favorable for lenders because the loan is fully funded within days of closing. Therefore, unlike a committed revolving credit facility, it does not require rapid deployment of capital over the life of the loan.
Credit guaranties and CRT transactions (also known as synthetic risk transfers (SRTs)) are two other tools lenders are using to mitigate their exposure, manage in-house lending limits, and increase their business lines. CRT transactions involve the transfer of credit risk of all or a tranche of a portfolio of financial assets to third-party investors. CRTs take on various forms but with each version the recipient entity assumes a credit risk in exchange for a financial upside.
There has also been a notable increase in credit guaranties. In a credit guaranty transaction, a third party, usually an insurer, agrees to function as a guarantor by pledging to repay all or part of a loan if a borrower defaults in exchange for a premium.
Listen as our authoritative panel explores the evolution and status of term loans, CRTs, and credit guaranties and offers advice for structuring these transactions.
Outline
- Review of current market conditions
- Term loans
- Credit risk transfers
- Credit guaranties
- Considerations for choosing a proper structure
- Structuring the transaction
- Overcoming challenges and risks
- Other issues and considerations
Benefits
The panel will address these and other relevant considerations:
- What are the current challenges and market conditions for subscription credit lines?
- How are term loans used to complement other forms of financing?
- Why have credit risk transfers and credit guaranties seen an increase in popularity in recent years?
- What are the challenges and practical considerations when structuring these credit line structures?
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