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Lending & Secured Finance 2021 Lending & Secured Finance 2021 A practical cross-border insight into lending and secured finance Ninth Edition Featuring contributions from: Allen & Overy LLP Fried, Frank, Harris, Shriver & Jacobson LLP O’Melveny & Myers LLP Asia Pacific Loan Market Association Gonzalez Calvillo Orrick Herrington & Sutcliffe LLP Astrea Holland & Knight Proskauer Rose LLP Bär & Karrer Ltd. Latham & Watkins LLP Rodner, Martínez & Asociados Cadwalader, Wickersham & Taft LLP Lee and Li, Attorneys-at-Law S. Koukounis & Partners LLC Carey Loan Market Association Sardelas Petsa Law Firm Carey Olsen Jersey LLP Loan Syndications and Trading Association Seward & Kissel LLP Cleary Gottlieb Steen & Hamilton LLP Loyens & Loeff Luxembourg S.à r.l. Shearman & Sterling LLP Criales & Urcullo Macesic and Partners Sidley Austin LLP Cuatrecasas Maples Group Skadden, Arps, Slate, Meagher & Flom LLP Davis Polk & Wardwell LLP Marval O’Farrell Mairal SZA Schilling, Zutt & Anschütz Rechtsanwaltsgesellschaft mbH Dechert LLP McMillan LLP Veirano Advogados Dillon Eustace Milbank LLP Wakefield Quin Limited Drew & Napier LLC Morgan, Lewis & Bockius LLP Walalangi & Partners Fellner Wratzfeld & Partners Mori Hamada & Matsumoto (in association with Nishimura & Asahi) Freshfields Bruckhaus Deringer LLP Morrison & Foerster LLP White & Case LLP Table of Contents Editorial Chapters Loan Syndications and Trading: An Overview of the Syndicated Loan Market 1 Bridget Marsh & Tess Virmani, Loan Syndications and Trading Association Loan Market Association – An Overview 7 Hannah Vanstone, Loan Market Association Asia Pacific Loan Market Association – An Overview 13 Andrew Ferguson & Rosamund Barker, Asia Pacific Loan Market Association Expert Analysis Chapters An Introduction to Legal Risk and Structuring Cross-Border Lending Transactions 16 Thomas Mellor, Marcus Marsh & Michael Byrnes, Morgan, Lewis & Bockius LLP Global Trends in Leveraged Lending 21 Joshua Thompson, James Crooks & Bryan Robson, Sidley Austin LLP The Rise of the SPAC 31 Michael Steinberg & Alain Dermarkar, Shearman & Sterling LLP Intellectual Property and Personal Data in Drop-Down Financings 36 Frank J. Azzopardi, Scott M. Herrig, Eli J. Vonnegut & Daniel F. Forester, Davis Polk & Wardwell LLP The Pandemic: A Regulatory Perspective 41 Bill Satchell & Elizabeth Leckie, Allen & Overy LLP Acquisition Financing in the United States: A Year of Panic and Rebound 52 Geoffrey Peck & Mark S. Wojciechowski, Morrison & Foerster LLP A Comparative Overview of Transatlantic Intercreditor Agreements 58 Miko Bradford & Benjamin Sayagh, Milbank LLP A Comparison of Key Provisions in U.S. and European Leveraged Loan Agreements 66 Sarah M. Ward & Clive J. Wells, Skadden, Arps, Slate, Meagher & Flom LLP Fund Finance: 2020 Year in Review 84 Michael C. Mascia, Cadwalader, Wickersham & Taft LLP Recent Developments in U.S. Term Loan B 87 Denise Ryan & Kyle Lakin, Freshfields Bruckhaus Deringer LLP The Continued Prevalence of European Covenant Lite 96 Jane Summers, Daniel Seale & Karan Chopra, Latham & Watkins LLP Restructuring Across the Pond and Back: A Comparison of Chapter 11 and the New UK Act 100 Judah Frogel, Dan Guyder, Jennifer Marshall & Shaheen Karolia, Allen & Overy LLP Analysis and Update on the Continuing Evolution of Terms in Private Credit Transactions 107 Sandra Lee Montgomery & Michelle L. Iodice, Proskauer Rose LLP Trade Finance on the Blockchain: 2021 Update 117 Josias Dewey, Holland & Knight Financing Your Private Debt Platform 124 Global Finance Group, Dechert LLP An Overview of Debtor in Possession Financing 134 Gary L. Kaplan & Stewart A. Kagan, Fried, Frank, Harris, Shriver & Jacobson LLP Developments in Midstream Oil and Gas Finance in the United States 139 Elena Maria Millerman, Charlie Ofner, Taylor Pullins & Ariel Oseasohn, White & Case LLP LIBOR – The End is Near(er)? 147 Kalyan (“Kal”) Das & Y. Daphne Coelho-Adam, Seward & Kissel LLP 2021 Private Credit and Middle Market Update: Pandemic Priming Shifts Debt to Defence 151 Jeff Norton, Jennifer Taylor, Sung Pak & Adam Longenbach, O’Melveny & Myers LLP Bankruptcy Asset Sales & Acquisition Financing Process: Key Considerations from a Buyer’s Perspective 155 Margaret (Meme) S. Peponis, Lisa M. Schweitzer, Katherine (Katie) R. Reaves & John H. Veraja, Cleary Gottlieb Steen & Hamilton LLP Table of Contents Q&A Chapters Argentina Italy 161 Marval O’Farrell Mairal: Juan M. Diehl Moreno & 325 Allen & Overy Studio Legale Associato: Stefano Diego A. Chighizola Sennhauser & Alessandra Pirozzolo Austria Japan 171 Fellner Wratzfeld & Partners: Markus Fellner & 335 Mori Hamada & Matsumoto: Yusuke Suehiro Florian Kranebitter Jersey Belgium 343 Carey Olsen Jersey LLP: Robin Smith, Laura Healy, 182 Astrea: Dieter Veestraeten Kate Andrews & Peter German Bermuda Luxembourg 189 Wakefield Quin Limited: Erik L Gotfredsen & Jemima 353 Loyens & Loeff Luxembourg S.à r.l.: Antoine Fortier Fearnside Grethen & Tina Fettes Bolivia Mexico 197 Criales & Urcullo: Andrea Mariah Urcullo Pereira & 362 Gonzalez Calvillo: José Ignacio Rivero Andere & Luis Valda Yanguas Jacinto Avalos Capin Brazil Netherlands 205 Veirano Advogados: Lior Pinsky, Ana Carolina 370 Freshfields Bruckhaus Deringer LLP: Mandeep Lotay Barretto & Amanda Leal & Tim Elkerbout British Virgin Islands Russia 213 Maples Group: Michael Gagie & Matthew Gilbert 378 Morgan, Lewis & Bockius LLP: Grigory Marinichev & Alexey Chertov Canada 221 McMillan LLP: Jeff Rogers & Don Waters Singapore 387 Drew & Napier LLC: Pauline Chong, Renu Menon, Cayman Islands Blossom Hing & Ong Ken Loon 232 Maples Group: Tina Meigh & Bianca Leacock South Africa Chile 398 Allen & Overy (South Africa) LLP: Lionel Shawe 240 Carey: Diego Peralta, Fernando Noriega & Diego Lasagna Spain 409 Cuatrecasas: Héctor Bros & Manuel Follía Croatia 248 Macesic and Partners: Ivana Manovelo Sweden 420 White & Case LLP: Carl Hugo Parment & Magnus Cyprus Wennerhorn 257 S. Koukounis & Partners LLC: Stella C. Koukounis, Chara Paraskeva & Andreas Zevlaris Switzerland 427 Bär & Karrer Ltd.: Frédéric Bétrisey, Lukas Roesler, England Micha Schilling & Tatiana Ayranova 266 Allen & Overy LLP: Oleg Khomenko & Jane Glancy Taiwan France 437 Lee and Li, Attorneys-at-Law: Hsin-Lan Hsu & 277 Orrick Herrington & Sutcliffe LLP: Carine Mou Si Yan Odin Hsu Germany United Arab Emirates 287 SZA Schilling, Zutt & Anschütz 446 Morgan, Lewis & Bockius LLP: Victoria Mesquita Rechtsanwaltsgesellschaft mbH: Dr. Dietrich F. R. Wlazlo & Tomisin Mosuro Stiller, Dr. Andreas Herr & Dr. Michael Maxim Cohen USA Greece 462 Morgan, Lewis & Bockius LLP: Thomas Mellor, 297 Sardelas Petsa Law Firm: Panagiotis (Notis) Katherine Weinstein & Matthew Edward Schernecke Sardelas & Aggeliki Chatzistavrou Venezuela Indonesia 475 Rodner, Martínez & Asociados: Jaime Martínez 306 Walalangi & Partners (in association with Nishimura Estévez & Asahi): Miriam Andreta, R. Wisnu Renansyah Jenie & Raditya Pratamandika Putra Ireland 314 Dillon Eustace: Conor Keaveny, Jamie Ensor & Richard Lacken 124 Chapter 18 Financing Your Private Debt Platform Dechert’s Global Finance Group Over the last several years, financing options for private debt plat- the ordinary course, returns on investments, incurrence of forms have become increasingly diverse. There is now a broad debt, issuance of equity and receipt of insurance proceeds). range of products available to managers seeking to leverage their ■ Cash Flow. Loan proceeds may be used for general investment portfolios. These products serve different purposes corporate purposes, including purchases of assets that do and are provided by different investor groups. In this chapter, not receive credit in the borrowing base. Furthermore, we explore some of the different financing options that private cash generated from the business is not required to be sent debt fund managers have utilized in recent years. Such prod- to a lockbox or to be paid subject to a payment waterfall. ucts include senior secured facilities, unsecured notes and struc- Instead, a borrower retains its rights to direct use of cash tured credit products. Common senior secured facilities include from its various accounts until a default occurs, at which asset-based loans (ABLs), loan-to-SPVs (special purpose vehi- time the secured parties may exercise authority over any cles), hybrid subscription and ABL lines, collateralized loan obli- cash or securities held in accounts governed by a control gations (CLOs) and hybrid variants. Unsecured notes include agreement. Cash may also be freely moved up and down rated notes, baby bonds and convertible notes. Available struc- the capital structure, in some cases subject to no default tured credit products include repurchase agreements, total and a borrowing base cushion, including to make distribu- return swaps and forward contracts. tions and prepay other debt. ABLs for registered invest- ment companies (RICs) also frequently permit certain I Senior Secured Facilities distributions notwithstanding the existence of a default, typically in an amount equal to the higher of the net invest- A. Asset-Based Loans ment income or the amount of required tax distributions estimated by a borrower, in each case subject to a cushion. ■ Borrowing Base. Borrowing bases for ABLs comprise What is an asset-based loan facility? the following primary components: ABLs at the fund level are one method of obtaining plat- ■ Eligibility Criteria. Although eligibility criteria vary form-wide financing. ABLs advance against a borrower’s port- borrower-to-borrower and, in some cases, provid- folio of investments
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