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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Wednesday, February 19, 2025

  • 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 webinar will examine margin loan facilities where securities are pledged as collateral. The panel will discuss the pros and cons of margin loan financing for private equity sponsors, the key terms and structural components of margin loan facilities, best practices for perfection, the mechanics of margin calls and cures, and day-to-day facility maintenance issues. The discussion will also focus on different methods for valuing public v. private securities, and the different structures and timing for margin calls in these facilities.

Faculty

Craig S. Unterberg
Partner
Haynes & Boone LLP

Mr. Unterberg is a member of Haynes Boone’s Executive Committee and the managing partner of the firm’s New York office. He has handled an industry-leading number of margin stock, NAV facilities, and structured equity transactions on behalf of financial institutions, private equity funds, and hedge funds. Mr. Unterberg heads up the firm’s New York-based Margin Lending and Structured Equity Practice Group and is a go-to lawyer for his clients on complex Regulation U and other regulatory matters.

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LeAnn L. Chen
Partner, Co-Chair Finance Practice Group
Haynes & Boone LLP

Ms. Chen represents banks, credit funds, hedge funds, private equity funds, broker-dealers and other financial institutions in a wide range of financial transactions, including NAV and hybrid facilities, margin lending, hedge fund loans, syndicated financing, asset based lending, subscription facilities, and DIP financing. She regularly advises clients on complex issues regarding NAV facility structures, pledge of private equity interests, margin regulations, and Rule 144 matters. Ms. Chen also has years of experience handling complex tri-party account arrangements with major custodian banks in the U.S.

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Description

The recent surge in asset-based lending to private equity funds has often included margin financing where shares are pledged in support of asset-based loans. The collateral may include publicly traded securities, preferred shares, convertible notes, or debt of public companies. Finance counsel must understand the nuances of margin lending with regard to each collateral type and how it fits into the entire transaction.

The method of perfection may vary depending on the type of collateral. Public securities can be deposited into a custodial securities account with a control agreement in favor of the lender. Control over book-entry securities can be effected with a contractual control agreement with the issuer or the lender to take physical control of certificated securities.

Valuation is a key component of margin credit facilities. There must be a valuation method to track LTV, whether by mark-to-market for publicly traded securities, or value as reported by the sponsor investment vehicle to its investors and creditors. If the securities fall in value, a margin call will require a cure to reduce the LTV to the required level.

A cure is accomplished by repayment of a portion of the loan or posting additional collateral. If a cure is not possible, the borrower may be forced to sell shares and apply the proceeds to pay down the loan. If the borrower's shares were not registered in connection with the related IPO, a registration statement must be filed, or the sale must be conducted pursuant to an exemption from registration.

Listen as our authoritative panel discusses the structuring, documentation, and administration of margin loans.

Outline

  1. Reasons behind the use of margin loan financing; benefits for private fund sponsors
  2. Types of securities pledged as collateral
  3. Valuation and LTV covenants
  4. Methods of perfection
  5. SPV borrower
  6. Regulation U
  7. Mechanics of a margin facility
  8. Issues with restricted shares
  9. Mandatory prepayments
  10. Release of collateral

Benefits

The panel will review these and other relevant issues:

  • When is it advantageous for a private equity sponsor to seek margin financing in connection with other PE financing?
  • What are the methods of perfection when the loan collateral is securities?
  • How are margin calls made, and how are they cured, in a margin credit facility?