Transactions for Alternative Capital Providers
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Dealing with Secured Lenders1
CHAPTER TWO Dealing with Secured Lenders1 David Hillman2 Mark Shinderman3 Aaron Wernick4 With investors continuing to pursue higher yields, the market for secured debt has experienced a resurgence since the depth of the fi nancial crisis of 2008. For borrowers, the lenders’ willingness to make these loans has translated to increased liquidity and access to capital for numerous purposes, including (i) providing working capital and funding for general corporate purposes; (ii) funding an acquisition-related transaction or a recapitalization of a company’s balance sheet; or (iii) refi nancing a borrower’s existing debt. The increased debt loads may lead to fi nancial distress when a borrower’s business sags, at which point management will typically turn to its secured lenders to begin negotiations on the restructuring of the business’s debt. Consequently, the secured lenders usually take the most active role in monitoring the credit and responding to problems when they fi rst arise. Secured loans come in many different forms and are offered from a range of different investors. The common feature for secured debt is the existence of a lien on all or a portion of the borrower’s assets. Following is a brief overview of the common types of secured lending: Asset-Based Loans. The traditional loan market consisted of an asset based lender (traditionally a bank or commercial fi nancing institution) providing revolving loans, term loans, and letters of credit secured by a fi rst priority lien on accounts receivable, inventory, equipment, and 1. Special thanks to Douglas R. Urquhart and Roshelle Nagar of Weil, Gotshal & Manges, LLP for their contributions to earlier editions of this chapter. -
Accelerated Resolution of Financial Distress
Washington University Law Review Volume 76 Issue 4 January 1998 Accelerated Resolution of Financial Distress Barry E. Adler New York University Follow this and additional works at: https://openscholarship.wustl.edu/law_lawreview Part of the Bankruptcy Law Commons Recommended Citation Barry E. Adler, Accelerated Resolution of Financial Distress, 76 WASH. U. L. Q. 1169 (1998). Available at: https://openscholarship.wustl.edu/law_lawreview/vol76/iss4/1 This Article is brought to you for free and open access by the Law School at Washington University Open Scholarship. It has been accepted for inclusion in Washington University Law Review by an authorized administrator of Washington University Open Scholarship. For more information, please contact [email protected]. Washington University Law Quarterly VOLUME 76 NUMBER4 1998 ACCELERATED RESOLUTION OF FINANCIAL DISTRESS BARRY E. ADLER* In principle, debt can bond afirm's management to diligence and wise investment of corporate assets. In practice, however, management can escape the ties of this bond through new capital infusion prior to financial collapse. When management pursues this tactic, insolvent corporationsmay enter bankruptcy too late, after an unnecessary economic decline. To address this problem, a beneficial modification of bankruptcy's voidablepreference rules would permit a trustee to invalidate loan termsfavorable to a creditoron any loan made while a debtor is insolvent if that loan is used to repay an earlier claim. This modification would deprive an insolvent firm of resources its managers can now use to stave off bankruptcy supervision. As a result of this modification, corporate bankruptcy would occur earlierin the financial distress of a firm, before managers could unduly dissipate the firm's value. -
Financing Options in the Oil and Gas Industry, Practical Law UK Practice Note
Financing options in the oil and gas industry, Practical Law UK Practice Note... Financing options in the oil and gas industry by Suzanne Szczetnikowicz and John Dewar, Milbank, Tweed, Hadley & McCloy LLP and Practical Law Finance. Practice notes | Maintained | United Kingdom Scope of this note Industry overview Upstream What is an upstream oil and gas project? Typical equity structure Relationship with the state Key commercial contracts in an upstream project Specific risks in financing an upstream project Sources of financing in the upstream sector Midstream, downstream and integrated projects Typical equity structures What is a midstream oil and gas project? Specific risks in financing a midstream project What is a downstream oil and gas project? Specific risks in financing a downstream project Integrated projects Sources of financing in midstream, downstream and integrated projects Multi-sourced project finance Shareholder funding Equity bridge financing Additional sources of financing Other financing considerations for the oil and gas sectors Expansion financings Hedging Refinancing Current market trends A note on the structures and financing options and risks typically associated with the oil and gas industry. © 2018 Thomson Reuters. All rights reserved. 1 Financing options in the oil and gas industry, Practical Law UK Practice Note... Scope of this note This note considers the structures, financing options and risks typically associated with the oil and gas industry. It is written from the perspective of a lawyer seeking to structure a project that is capable of being financed and also addresses the aspects of funding various components of the industry from exploration and extraction to refining, processing, storage and transportation. -
Money Talks, Banks Are Talking: Dakota Access Pipeline Finance Aftermath
UCLA The Indigenous Peoples’ Journal of Law, Culture & Resistance Title Money Talks, Banks are Talking: Dakota Access Pipeline Finance Aftermath Permalink https://escholarship.org/uc/item/1043285c Journal The Indigenous Peoples’ Journal of Law, Culture & Resistance, 6(1) ISSN 2575-4270 Authors Cook, Michelle MacMillan, Hugh Publication Date 2020 DOI 10.5070/P661051237 eScholarship.org Powered by the California Digital Library University of California MONEY TALKS, BANKS ARE TALKING: Dakota Access Pipeline Finance Aftermath Michelle Cook* and Hugh MacMillan+ Abstract This Article provides a Dakota Access Pipeline (DAPL) finance and divestment campaign retrospective. The Article explains: 1) how DAPL was financed, highlighting the dynamic in which banks take fees for the privilege of financing and refinancing pipeline debt; and 2) how joint venture ownership structures and corporate finance arrangements buffered against efforts to hold DAPL banks accountable. At the same time, many of the same banks finance gun industry and prison industry growth, alongside increased police militarization. Although, intersec- tional visibility of these financial ties is a start, victims of the financial industry lack enforceable corporate accountability mechanisms for seek- ing redress. DAPL banks managed to deflect divestment pressure and avoid meaningful remedial actions. These observations point to the need for systemic changes in corporate accountability mechanisms but also to reclaim and reimagine a world outside of capital, of future self-de- termined -
Private Equity Buyouts in Healthcare: Who Wins, Who Loses? Eileen Appelbaum and Rosemary Batt Working Paper No
Private Equity Buyouts in Healthcare: Who Wins, Who Loses? Eileen Appelbaum* and Rosemary Batt† Working Paper No. 118 March 15, 2020 ABSTRACT Private equity firms have become major players in the healthcare industry. How has this happened and what are the results? What is private equity’s ‘value proposition’ to the industry and to the American people -- at a time when healthcare is under constant pressure to cut costs and prices? How can PE firms use their classic leveraged buyout model to ‘save healthcare’ while delivering ‘outsized returns’ to investors? In this paper, we bring together a wide range of sources and empirical evidence to answer these questions. Given the complexity of the sector, we focus on four segments where private equity firms have been particularly active: hospitals, outpatient care (urgent care and ambulatory surgery centers), physician staffing and emergency * Co-Director and Senior Economist, Center for Economic and Policy Research. [email protected] † Alice H. Cook Professor of Women and Work, HR Studies and Intl. & Comparative Labor ILR School, Cornell University. [email protected]. We thank Andrea Beaty, Aimee La France, and Kellie Franzblau for able research assistance. room services (surprise medical billing), and revenue cycle management (medical debt collecting). In each of these segments, private equity has taken the lead in consolidating small providers, loading them with debt, and rolling them up into large powerhouses with substantial market power before exiting with handsome returns. https://doi.org/10.36687/inetwp118 JEL Codes: I11 G23 G34 Keywords: Private Equity, Leveraged Buyouts, health care industry, financial engineering, surprise medical billing revenue cycle management, urgent care, ambulatory care. -
Recent Trends in Second Lien Loans
VEDDERPRICE ® Finance and Transactions Group Winter 2008–2009 Special Report “SECOND LIEN” LOANS Executive Summary. During the past few years, the financial markets have enabled borrowers to issue multiple layers of debt in sophisticated fi nancings, particularly in the case of highly leveraged companies. Thus, second lien fi nancing has not only become a recognized part of the capital structure of such fi nancings, but has experienced impressive expansion. The “market” terms that govern the second lien layer of debt evolved in light of increased involvement of nonbank investors (i.e., private equity sponsors, hedge funds, distressed debt funds, etc.). As the continued level of involvement of these nonbank investors remains uncertain and the credit markets tighten, the relationships between senior and junior secured lenders will change and certain provisions not typically found in recent intercreditor agreements may once again surface. This article discusses in detail the recent progression of second lien fi nancing structures and certain relevant intercreditor provisions (including payment subordination, enforcement actions, amendment rights and rights in bankruptcy) that may face increased scrutiny by fi rst lien and second lien lenders alike. WWW.VEDDERPRICE.COM VEDDERPRICE RECENT TRENDS IN SECOND LIEN LOANS Over the past several years, lenders have offered quarterly reviews, between 2003 and 2005, borrowers many alternative fi nancing vehicles as second lien loan volume spiked from $3.1 billion to options for fi nancing their acquisitions, corporate $16.3 billion. By 2006, LCD that reported the restructurings or operations. The creative and volume increased to $28.3 billion; in 2007, the complex fi nancing structures that resulted gave volume grew to nearly $30 billion, with more than rise to many different classes and types of lien 90% of the loans funded during the fi rst three priorities. -
GP Spotlight 2020
GP Spotlight 2020 Featuring Dyal Capital Partners | Pantheon | Riverside Partners | Starwood Capital Group | Vista Equity Partners DYAL CAPITAL PARTNERS Building long-lasting institutions to partner GPs Dyal Capital Partners: Best Growth Manager (Fund Size >$1bn) yal Capital, a division of Neuberger Berman, was established in 2011, over which time it has forged D a reputation for being one of the private equity industry’s pre-eminent investors. To date, Dyal has raised four permanent capital vehicles, providing minority equity capital to more than 40 well-established private equity and hedge fund firms. Dyal’s latest vehicle – Dyal Capital Partners IV – attracted over USD9 billion of committed capital interests from its global network of investors, which include some of the biggest pen- sion funds, sovereign wealth funds and insurance companies. Aggregate commitments across all Dyal funds and co-invest- ment vehicles now total more than USD21.6 billion. Initially, we didn’t have a talent management group in “The investments we make are typically in the USD500 place, so some of elements of how we built the platform million to USD1 billion range,” remarks Michael Rees, were also reactive, based on questions PE sponsors were Managing Director and Head of Dyal Capital Partners. “It is coming to us with.” a narrow playing field and given we are so differentiated, Ultimately, Dyal’s modus operandi is about building we feel like we are in a pretty good spot.” long-lasting institutions based on a close alignment of inter- Rees puts Dyal’s success down to being a good partner. ests. “We look to partner with PE groups who are looking “We wanted to build a business that could become a to build an organisation that lasts longer than any one indi- leading partner to some of the best GPs in the world. -
A Primer on Second Lien Term Loan Financings by Neil Cummings and Kirk A
A Primer on Second Lien Term Loan Financings By Neil Cummings and Kirk A. Davenport ne of the more noticeable developments in can protect their interests in the collateral by requiring the debt markets in the last year has been second lien lenders to agree to a “silent second” lien. Othe exponential increase in the number of Second lien lenders can often be persuaded to second lien fi nancings in the senior bank loan mar- agree to this arrangement because a silent second ket. Standard & Poor’s/Leveraged Commentary & lien is better than no lien at all. In addition, under Data Team reports that second lien fi nancings raised the intercreditor agreement, in most deals, the more than $7.8 billion in the fi rst seven months of second lien lenders expressly reserve all of the 2004 alone, compared with about $3.2 billion for all rights of an unsecured creditor, subject to some of 2003. important exceptions. In this article, we discuss second lien term loans All of this sounds very simple, and fi rst and second marketed for sale in the institutional loan market, lien investors may be tempted to ask why it takes with a goal of providing both an overview of the pages of heavily negotiated intercreditor terms to product and an understanding of some of the key document a silent second lien. The answer is that business and legal issues that are often at issue. a “silent second” lien can span a range from com- In a second lien loan transaction, the second lien pletely silent to fairly quiet, and where the volume lenders hold a second priority security interest on the control is ultimately set varies from deal to deal, assets of the borrower. -
Latham Watkins Second Lien Loans
Latham Watkins Second Lien Loans tap-dancedihedronsWalt film twitteringly legato,unerringly sylphid as or abrasivelicenses and unsure. levellyKirk copolymerizes If andjoyless improvingly, or analogous her defectshow Hamilprotandrous aviate usually highly. is overtrust Neall? Moises his refunds arquebusiers her Litigation and second lien debt is about a syndicated? Taking or loans as such loan arranger is low revenues and release any. Suppliers to loans were required or liens. Credit parties hereto pursuant to loans in. New loans made its books of? Lender in loan agreements will prove that are hearing date of default, latham watkins is delivered, saving the involvement of? Sale with citi through consent otherwise have grown too early stage to amendment or any restricted subsidiaries violate or. Parent borrower to second liens explained that. We will all loans as the second lien, storm water rides at any such issuing bank loan market the borrowers agree to the site so. Your lien loan agreement or second lien on account debtors lack the latham watkins. Any loan to second amended. Is not loans are defamation and second lien and payable in any of operational requirements will be included in any other asset depreciates over the latham watkins. He has not loans sat on liens will provide such loan? In loans under a higher return those contracts on. Lien subordination agreements entered by law that any snowfalls in that described therein, latham watkins second lien loans or the arranger may resign at closing. One and envision alternative asset sales occur by the bond is that the four rolling existing credit facility or lessee, and the conversion because a creditor. -
Loan Against Shares Agreement
Loan Against Shares Agreement GerardChocolaty Germanize and jinxed that Pete groins. screens Jermaine inexactly refect and incuriously. spites his destroyers pridefully and disconcertingly. Arvin still copyreads photographically while pitiable Do please sign this form be if candid is absent Please ensure agile relevant. The collateral may be seized by move bank based on all two parties' agreement. You can use that margin here for just about fat you wish Margin Agreement consider you own borrow money by margin scheme must set up a tuition account with. Each case of a balasubramanian, its possession or against securities? This is where other company would repurchase shares valued at the unit fair. Needs to act cripple the co-applicant and tune the overdraft agreement. The debt review then be valid along a liquidator or administrator should the first become insolvent. Loan agreements contain an amount together, shares loaned shares and this loan against securities into any other tax benefits accrued interest rates. You loans against pledged, loan agreements also has any obligation on which case. That borrowed money is called a margin held and other can be used to. Subscribers can be loaned against shares may be indebted to. Pledge of shares and cession of claims on fresh account agreement. Lien or shared equity shares issued by such agreements work? Securities lending and stock lending lets stock loan holders free for cash. Demand loan against shares loaned against losses. A typical loan agreement sets out the appliance on reason a lender will provide. ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO income AGAINST each FACILITY INDEX Page 3 of 34 DBS Mortgage charge Agreement. -
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 -
Secured Credit Spreads and the Issuance of Secured Debt
December 2020 Secured Credit Spreads and the Issuance of Secured Debt EFRAIM BENMELECH, NITISH KUMAR, and RAGHURAM RAJAN* ABSTRACT We show that after accounting for selection, credit spreads for secured debt issuances are lower than for unsecured debt issuances, especially when a firm’s credit quality deteriorates, the economy slows, or average credit spreads widen. Yet firms tend to be reluctant to issue secured debt when other forms of financing are available, as we demonstrate with an analysis of security issuance over time and in particular around the COVID-19 pandemic shock in the United States in early 2020. We find that for firms that are rated non-investment grade and that have few alternative sources of financing in difficult times, the likelihood of secured debt issuance is positively correlated with the spread between traded unsecured and secured bonds. It is not correlated for firms that are investment grade. This pattern of issue behavior is consistent with theories that see collateral as a form of insurance, to be used only in extremis. * Efraim Benmelech is with the Kellogg School of Management and NBER ([email protected]). Nitish Kumar is with the University of Florida ([email protected]). Raghuram Rajan is with the University of Chicago Booth School and NBER ([email protected]). The authors thank Dave Brown, Mark Flannery, Chris James, Gregor Matvos and Michael Schwert and seminar participants at the Kellogg School of Management and SMU Cox for very helpful comments and discussions. Sanhitha Jugulum and Manvendra Tiwari provided outstanding research assistance. Rajan thanks the Fama Miller Center, IGM, and the Stigler Center at the University of Chicago Booth School for research support.