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Current Issues in Syndicated Lending: Defaulting Lenders and the Failure to Fund
The adverse impact of the current market disruption on many financial institutions has given rise to an increased risk of the occurrence of lenders defaulting on lending obligations. This, in turn, has placed unexpected focus both on the effectiveness of defaulting lender provisions and certain other funding and management mechanics of many syndicated credit agreements. In particular, the typical remedy that allows the borrower to replace a defaulting lender at par has proven to be inadequate due to the current lack of liquidity in the market and the trading levels of most syndicated loans at well below par.
Most current syndicated credit agreements include a concept of a defaulting lender to address situations where a lender fails to fund its pro rata share of an advance, reimbursement, or participation under a syndicated credit agreement (any such lender, a “Defaulting Lender”). For example, the Model Credit Agreement Provisions (Effective May 2005, the “Model Provisions”) for syndicated credit agreements published by the Loan Syndications and Trading Association expressly give a borrower the right to require any Defaulting Lender “to assign and delegate, without recourse (in accordance with and subject to the [applicable assignment terms and conditions], all of its interests, rights and obligations under this Agreement and the related Loan Documents ' to an assignee” at par. (See, Model Provisions, Yield Protection, Section 3(b) Mitigation of Obligations; Replacement of Lenders) Notably, the Model Provisions do not include a formal definition of “Defaulting Lender,” and except as described above, the Model Provisions do not address Defaulting Lender issues. Unlike the Model Provisions, most syndicated credit agreements do include a formal definition of “Defaulting Lender,” and this definition frequently includes any Lender that is deemed insolvent or is in receivership within the definition. As evidenced by the Model Provisions, defaulting lender terms were typically drafted with the expectation that a Defaulting Lender would be a rare and isolated occurrence, and could be readily replaced by an assignment at par.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
Beach Boys Songs Written Decades Ago Triggered Current Quarrel With Lawyers
There's current litigation in the ongoing Beach Boys litigation saga. A lawsuit filed in 2019 against Nevada residents Mike Love and his wife Jacquelyne in the U.S. District Court for the District of Nevada that alleges inaccurate payment by the Loves under the retainer agreement and seeks $84.5 million in damages.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Transfer Tax Implications on Real Property Leases
The real property transfer tax does not apply to all leases, and understanding the tax rules of the applicable jurisdiction can allow parties to plan ahead to avoid unnecessary tax liability.