Structuring Commercial Loan Term Sheets, Proposals and Commitment Letters: Key Terms for Lenders and Borrowers

Similar documents
Commitment Letters in Commercial Loans Borrower and Lender Strategies to Negotiate and Enforce Binding Loan Commitments

Commitment Letters in Commercial Loans Borrower and Lender Strategies to Negotiate and Enforce Binding Loan Commitments

Completion Guaranties in Construction Lending: Key Provisions for Lenders and Guarantors

Interest Rate Hedges in Real Estate Finance: Placing Swaps, Caps, and Collars on Floating Rate Loans

Structuring Commercial Loan Documents to Protect Non-Affiliated Lenders

Key Commercial Lease Provisions and SNDAs That Concern Lenders in Mortgage and Leasehold Financing

Distressed Loan Workouts: How Equity Cure Rights Work, Negotiating Loan Restructuring and Forbearance Agreements

Structuring Financial Covenants, EBITDA, Events of Default and MAC Clauses in Loan Documents Maximizing Borrower Protection and Lender Remedies

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Commercial Lease Negotiations: Property and Liability Insurance, Proof of Coverage, AI and Loss Payee Issues

Creatively Completing The Capital Stack: Real Estate GP Private Equity Funds

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features: Brian E. Hammell, Esq., Sullivan & Worcester, Boston

Mezzanine Lending: Overcoming Lender Risks to Protect ROI

Structuring Preferred Equity Investments in Real Estate Ventures: Impact of True Equity vs. "Debt-Like" Equity

Asset-Based Lending: Navigating Borrowing Base, Article 9 Collateral Issues, and Key Loan Documentation Provisions

SBA Lending: Documenting, Closing and Servicing 7(a) and CDC/504 Loans

Best Efforts and Commercially Reasonable Efforts in M&A Agreements: Drafting and Interpretation Challenges

QDRO Drafting Boot Camp: Preparing QDROs for 401(k)s and Similar Defined Contribution Plans

Structuring Credit Facilities for Private Equity Funds: Subscription, NAV and Hybrid Loans

Clearing Title for Defects Due to Mortgage-Related Issues, Legal Description Errors, and Foreclosure

Structuring Incremental Loan Facilities: Key Terms, Most Favored Nation Provisions and Incremental Equivalent Agreements

Opinion Letters in Commercial Real Estate Best Practices to Minimize Risk When Crafting Third Party Opinions on Loans and Acquisitions

Survivor Benefit Plans and Military Divorce: Defending Against or Claiming Former-Spouse SBP Coverage

Allocating Operating Expenses in Commercial Real Estate Leases: Negotiating Strategies for Landlords and Tenants

Property Management and Leasing Agreements: Key Provisions for Multi-Family, Office, Retail and Industrial Properties

Renewable Energy and Corporate PPAs: Overcoming Regulatory, Financing, Intercreditor, Tax Challenges

Fraudulent Conveyance Exposure for Intercorporate Guaranties, Integrated Transactions and Designated-Use Loans

ERISA Compliance and Monitoring 401(k) Investments: Safe Harbor Rules and Appointing Advisers

ERISA Considerations in Structuring Credit Facilities with Private Investment Funds

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Structuring Leveraged Loans After Tax Reform: Concerns for Multinational Entities

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

UCC Article 9 Blanket Asset Lien Exclusions and Purchase Money Security Interests

Asset Sale vs. Stock Sale: Tax Considerations, Advanced Drafting and Structuring Techniques for Tax Counsel

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features: Elizabeth A. Gartland, Esq., Fenwick & West, San Francisco

Financing Multi-Family Housing: Structuring the Low Income House Tax Credit and Tax-Exempt Bonds Documenting Transactions for Investors and Developers

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Cash Management Structures, Waterfall Provisions and Reserves in Commercial Real Estate Finance Transactions

High Volatility Commercial Real Estate Loans: Guidance for Developers and Lenders on HVCRE Rules and Loan Covenants

Universal Health Services v. Escobar: Avoiding Implied Certification Liability Under FCA

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features: James O. Lang, Shareholder, Greenberg Traurig, Tampa, Fla.

Agreements Among Lenders in Unitranche Lending: Structural Issues and Current Trends

Bank Affiliate Transactions Under Scrutiny Complying With Regulation W's Complex Restrictions on Business Dealings with Affiliate Institutions

Drafting Asset Purchase Agreements: Reps, Warranties, Covenants, Conditions, Indemnity and Other Key Provisions

UCC Article 9 Blanket Asset Lien Exclusions and Purchase Money Security Interests

ERISA Retirement Plan Investment Management Agreements: Guidance for Plan Sponsors to Minimize Risks

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

M&A Indemnification Deal Terms: 2017 Survey Results

Exercising Setoff and Recoupment Rights in Bankruptcy

Private Equity Real Estate Fund Formation: Capital Raising, Regulatory Issues and Negotiating Trends

Corporate Governance of Subsidiaries: Board Roles and Responsibilities, Interplay With Parent Board, Liability Risks

Allocating Risk in Real Estate Leases: Contractual Indemnities, Additional Insured Endorsements and Waivers of Subrogation

and Waivers After Default Crafting Forbearance Agreements That Minimize Lender Liability and Bankruptcy Risks

Fiduciary Compliance in ESOP Transactions: Recent DOL Settlement Agreements

Covenant-Lite Loans: Recent Trends for U.S. Middle Markets and European Markets

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Structuring Equity Compensation for Partnerships and LLCs Navigating Capital and Profits Interests Plus Section 409A and Tax Consequences

Private Investment Funds and Tax Reform

Private Equity Waterfall and Carried Interest Provisions: Economic and Tax Implications for Investors and Sponsors

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Construction Subcontractor Default Insurance: A Viable Alternative to Performance Bonds?

Using Inverted Leases to Finance Renewable Energy Projects

Paul W. Hespel, Partner, Pepper Hamilton LLP, New York Joseph W. Price, Member, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC, New York

Scott J. Bakal, Partner, Neal Gerber & Eisenberg, Chicago Robert C. Stevenson, Attorney, Skadden Arps Slate Meagher & Flom, Washington, D.C.

Construction OCIP/CCIP Insurance Programs: Potential Coverage Gaps and Other Coverage Pitfalls

Bankruptcy Section 506(c) Surcharge on Secured Collateral

New Section 199A: Structuring Real Estate Transactions to Take Advantage of the Qualified Business Income Deduction

Using Partnership Flips to Finance Renewable Energy Projects: Evaluating Tax Risks, Navigating IRS Safe Harbors

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Tax Strategies for Real Estate LLC and LP Agreements: Capital Commitments, Tax Allocations, Distributions, and More

UCC Article 9 Update on Searching and Filing: Best Practices for Secured Lenders Under the Amended Rules

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Solar Securitization: The Emergence of a New Funding Structure

Using Partnership Flips to Finance Renewable Energy Projects: Evaluating Tax Risks, Navigating IRS Safe Harbors

Auto Injury Claim Recovery: Maximizing Pain and Suffering, Loss of Future Earning Capacity Damages

Drafting Shareholder Agreements for Private Equity M&A Deals

Protecting Trademarks Abroad: Madrid Protocol vs. National Filing Directly in Foreign Jurisdiction

ERISA Pre-Approved and Customized Benefit Plans: Overhauled IRS Procedures and Determination Letter Process

UCC Article 9 Update: Searching and Filing Under New Amendments

Presenting a 90-minute encore presentation featuring live Q&A. Today s faculty features:

M&A Buyer Protection Beyond Indemnification and Escrows

Minority Investors in LLCs: Contractual Limitations, Waivers of Fiduciary Duties, Other Key Provisions

Investment Adviser Advertising Rule: New SEC Guidance and Best Practices for Compliance

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Insurance Coverage for Statutory and Liquidated Damages and Attorney Fees: Policyholder and Insurer Perspectives

Uninsured and Underinsured Motorist Claims: Leveraging Insurance Stacking

Structuring Equity Compensation for Partnerships and LLCs Navigating Capital and Profits Interests Plus Section 409A and Tax Consequences

Zombie Corporations and CERCLA Liability: Identifying, Reviving and Pursuing Zombie PRPs

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Foreign Investment in U.S. Real Estate: Impact of Tax Reform

Trucking and Auto Injury Cases: Deposing Accident Reconstruction and Biomechanical Experts

401(k) Plan Nondiscrimination Testing: Guidance for Employee Benefits Counsel

Data Breaches in ERISA Benefit Plans: Prevention and Response

for Landlords and Tenants Negotiating Insurance, Indemnity and Mutual Waiver of Subrogation Provisions

Estate Planning With Grantor Trusts: Leveraging GRATs and IDGTs to Minimize Taxes, Preserve and Transfer Assets

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features: Matthew B. Grunert, Partner, Andrews Kurth Kenyon, Houston

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Transcription:

Presenting a live 90-minute webinar with interactive Q&A Structuring Commercial Loan Term Sheets, Proposals and Commitment Letters: Key Terms for Lenders and Borrowers Avoiding Unintended Consequences Limiting Drafting Ambiguity TUESDAY, JUNE 28, 2016 1pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Eric Goodison, Partner, Paul Weiss Rifkind Wharton & Garrison, New York Monica K. Thurmond, Partner, Paul Weiss Rifkind Wharton & Garrison, New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

Tips for Optimal Quality FOR LIVE EVENT ONLY Sound Quality If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory, you may listen via the phone: dial 1-866-873-1442 and enter your PIN when prompted. Otherwise, please send us a chat or e-mail sound@straffordpub.com immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.

Continuing Education Credits FOR LIVE EVENT ONLY In order for us to process your continuing education credit, you must confirm your participation in this webinar by completing and submitting the Attendance Affirmation/Evaluation after the webinar. A link to the Attendance Affirmation/Evaluation will be in the thank you email that you will receive immediately following the program. For additional information about continuing education, call us at 1-800-926-7926 ext. 35.

Program Materials FOR LIVE EVENT ONLY If you have not printed the conference materials for this program, please complete the following steps: Click on the ^ symbol next to Conference Materials in the middle of the lefthand column on your screen. Click on the tab labeled Handouts that appears, and there you will see a PDF of the slides for today's program. Double click on the PDF and a separate page will open. Print the slides by clicking on the printer icon.

Commitment Letters in Commercial Loans Borrower and Lender Approaches to Negotiate Loan Commitments June 28, 2016 1:00 PM 2:30 PM Eastern Standard Time Eric Goodison Monica Thurmond US1: 10603630v1

Presenters Eric Goodison, Partner, New York He has over 25 years of experience as a financing lawyer. He represents domestic and international clients in their borrowing and lending and other financing transactions, including acquisitions, divestitures, and restructurings. He has significant expertise in structuring, negotiating and consummating all types of leveraged financings. egoodison@paulweiss.com 212.373.3292 6

Presenters (continued) Monica Thurmond, Partner, New York She represents private equity sponsors and their portfolio companies in a variety of engagements such as leveraged acquisitions, structured exchange offers, first and second lien senior secured debt financings, debt and equity tender offers, high yield bridge financings and consent solicitations. She has also represented issuers in a variety of public and private equity and debt securities offerings, including initial public offerings, as well as high yield and convertible debt offerings. 212.373.3055 7

Outline I. Structure A. Binding or nonbinding B. Conditions II. Negotiating key terms A. General scope of terms B. Loan amount C. Collateral D. Interest rate E. Prepayments and Prepayment Penalty F. Guaranties G. Financial covenants H. Incremental Facilities I. Default provisions J. Affirmative and negative covenants K. Assignments L. Other considerations 8

I. Structure A. Binding or Nonbinding 1. Lender s Perspective a. Lender s fees and expenses, including attorneys fees, paid regardless of whether loan closes b. Possible fee tail c. Exclusivity a. Trade off underwriting fees vs certainty of funds b. Certain transactions require a fully underwritten commitment (acquisitions), while others may not (dividends, refinancing) c. Expenses may only be paid at close B. Conditions 1. Lender s Perspective a. No material adverse change b. Market clearing terms a. Depends on fully underwritten vs best efforts, general rule the fewer the better --need to understand Flex terms to see if commitment is really a disguised best efforts 9

I. Structure (continued) b. Sometimes borrower wants lender to have an out so they have a transaction out very dangerous strategy c. Best Efforts deal subject to lenders coming in on market clearing terms so limiting conditions is potentially less important d. Underwritten deal want an exhaustive list (avoid wording such as to include or including ) and as narrow and as objective as possible with any lender determinations made by commitment party and not syndicate (both a cosmetic issue for seller in an acquisition and an economic issue if reverse break fee on financing) Hot button issues: 1) Due diligence 2) Maximum closing leverage (and possible cure) 3) Solvency certificate or opinion; objective vs subjective standard 4) Outside date and marketing or syndication period 5) Approval of financial statements 6) Limiting closing representations to Specified Representations matching acquisition agreement 7) Acquisition Agreement amendments and approval 10

II. Negotiating Key Terms A. General Scope of Terms 1. Further negotiations, ordinary & customary definitive documentation vs. documentation precedent 2. Identify key parties (Lender/group, borrower, guarantors) 3. Terms unique to particular loan (i.e., pre baked acquisitions) B. Loan Amount 1. Lender s Perspective a. Not to exceed b. Basis for fees a. Commitment to cover full amount necessary watch terms like up to b. ABL potential uncertainty over ultimate amount at time of close due to: i. Fluctuations in borrowing base assets ii. Field Audits to be done iii. Eligibility criteria to be negotiated iv. Reserves v. Minimum Availability or Liquidity at close vi. Consider a minimum closing availability 11

II. Negotiating Key Terms (continued) C. Collateral 1. Lender s Perspective a. Limited Exclusions b. Priority and intercreditor and subordination agreements c. Access agreements (landlords, bailees; etc.) a. Negotiate exceptions or identify categories leaseholds, immaterial collateral b. Timing of perfection Sungard post closing language for non stock/ucc collateral c. Intercreditor if multiple secured commitments (1st/2nd lien structure or ABL/Term crossing lien structure), at a minimum outline key intercreditor terms (priority, standstill, etc.) 12

II. Negotiating Key Terms (continued) D. Interest Rate 1. Lender s Perspective a. 360 day convention b. Default interest upon default occurrence (vs. continuing/uncured default) a. 365 day for Base Rate b. Default Rate only on overdue, only if required, other mitigation c. Payment periods quarterly vs monthly for non Libor loans 13

II. Negotiating Key Terms (continued) E. Prepayments and Prepayment Penalty 1. Prepayments a. Lender s Perspective i. Reduce exposure over time ii. Capture excess cash b. Borrower s Perspective i. Limit prepayment events to asset sales, casualty and condemnation events and excess cash flow ii. Arrange for step-downs in ECF percentage based on leverage iii. Define investment rights broadly 2. Prepayment Penalty a. Lender s Perspective i. Amount, frequency, timing, and notice ii. Due upon acceleration b. Borrower s Perspective i. Exceptions involuntary acts such as excess cash, casualty events ii. Make Whole better than a no call 14

II. Negotiating Key Terms (continued) iii. Soft Calls designed to protect against downward pricing a) Triggers repayment with low cast debt b) Time 6 mos. 1 year c) Premium 101 d) Flex vs. commitment term e) Exceptions changed control, IPO, transformative acquisition F. Guaranties 1. Lender s Perspective most of consolidated group a. Limit to domestic entities, avoid a 956 material cost analysis b. Consider unrestricted concept c. Stop chain at one level above borrower, so any super hold co is unrestricted 15

II. Negotiating Key Terms (continued) G. Financial Covenants 1. Lender s Perspective a. Early warning seat at table a. Agree cushion to plan and perhaps identify plan b. Consider setting levels or annual levels with mid year stepdowns TBD c. Consider asking for Equity Cure right d. Cov-Lite, trigger e. Attach EBITDA definitions 16

II. Negotiating Key Terms (continued) H. Incremental Facilities 1. Lender s Perspective a. More control over debt terms b. One administrative agent and one collateral agent c. Preserve MFN treatment a. Can be borrowed with only the consent of participating lenders b. Streamlined documentation and marketing process c. Build in flexibility with respect to liens and trances d. Size the facility on base dollar amount plus amount based on satisfying pro forma leverage 17

II. Negotiating Key Terms (continued) I. Default Provisions 1. Lender s Perspective a. Cross-default b. Grace periods and opportunities to cure a. Identify the list of defaults, limit surprises later ( MAE ) b. Introduce concept of grace periods, cure rights and materiality thresholds 18

II. Negotiating Key Terms (continued) J. Affirmative and Negative Covenants 1. Lender s Perspective a. Keep in mind expectations of participants/syndicates b. Recognize the common covenants and specifically address covenants unique to the particular loan a. Identify the covenants and introduce concept of materiality threshold and grace periods b. Greater specificity on financial reporting (how long and how often) and hedging c. On negative covenants, consider addressing key exceptions such as material acquisitions or acquisition flexibility generally, debt incurrence, dividend expectations, know or planned major asset sales, sale lease back transactions or major planned cap ex 19

II. Negotiating Key Terms (continued) K. Other Considerations 1. Lender s Perspective a. Length of commitment and protection on being shopped b. Ability to successfully syndicate assistance, flex, assignment a. Length of commitment, time to complete transaction b. Other material terms: amortization, voting rights, mandatory prepayments (equity sweeps, excess cash flow, asset sales), borrower or affiliate right to acquire debt, and restrictions on transfers, including to competitors and blacklists 20