Counsel to Counsel - May 2008 - (Page 25)

their money, they were sometimes willing to make accommodations that in their heart of hearts they really didn’t like,” says Osborne Mills, co-chair of Squire Sanders’ Banking and Debt Finance practice. “Not anymore. People have gotten more cautious.” But that doesn’t mean corporate borrowers’ need for cash dries up just because “covenant light” loans are out. In fact, it may even increase. In addition to perennial capital needs for business or real estate acquisitions or improvements to facilities, in lender,” Guinn says. “In a distressed economy, corporate counsel should be concerned that hedge funds or other institutional investors are readily able to buy into the syndicate and may change the very nature of the credit. You don’t want to have people in your syndicate who are lending to buy. You want people who are lending to lend.” If your company is feeling the downturn acutely and needs to restructure a syndicated loan, it can be tricky. Each lender in a syndicate may need to approve the change, Networking relationships So what, if anything, can corporate borrowers do to save time and money? The only other alternatives are to try to get a single lender to increase your credit or to put together a small network from existing banking relationships. “You may have separate banking relationships for things like checking accounts, equipment finance and real estate deals that can be tapped to avoid a complicated and expensive syndication,” Mills says. “That’s a perfect opportunity to say, ‘What if we go to the bank that does all of our real estate lending and the bank that does all of our equipment lending and see if they can get together with our current revolving credit lender to get us to the level we need, on terms that will be just as good as, maybe better than, a syndicated loan, and a heck of a lot less expensive.’” International Syndicates Whether a corporation is going international for the first time or already has global operations, it may need banks added to a loan syndicate that are based in the countries where the borrower has interests. But international syndicates inherently add cost to the loan. “One thing that is always a consideration is the degree to which foreign subsidiaries are permitted under U.S. tax law to pledge collateral to support the borrowings of a U.S. parent,” says Squire Sanders Partner Osborne Mills. “Generally speaking you can’t have a foreign subsidiary guarantee the borrowings of the domestic parent or its domestic subsidiaries. Nor can you have that foreign subsidiary pledge collateral to secure domestic borrowings. If you do, bad tax things may happen.” The borrower may have structuring problems in matching the locations of collateral and cash flow with the location of loan indebtedness. Doing that, however, can be expensive, because the corporate borrower needs a different set of counsel in each target country, and in some places the process can be inordinately lengthy and complex. “The process can be relatively expeditious in countries like Canada, which are very similar to the United States,” Mills says. “But you go over to Germany? Wow. Eye-popping expense.” Founded in 1890, Squire, Sanders & Dempsey L.L.P. has more than 850 lawyers in 30 offices and 14 countries around the world. With one of the strongest integrated global platforms and a longstanding one-firm philosophy, Squire Sanders provides sophisticated seamless legal counsel worldwide. Article Participants: Guy Guinn Co-Chair, Banking and Debt Finance Practice gguinn@ssd.com a downturn companies may need money to restructure or recapitalize. But watch out. In troubled times there are more sharks in the water, and borrowers need to be sure their need for credit doesn’t compromise their autonomy. “There’s a secondary market for these loans through which the original lenders may be replaced by an entirely different type of and at a minimum a majority of the lenders will be needed. “In a syndicated loan you can’t just go to your friendly banker, with whom you’ve been dealing for years, and get an accommodation,” Mills says. “The agent will have to go out and get the consent, depending on the issue involved, of a majority of the banks, a supermajority of the banks, or all of the banks.” Osborne Mills Co-Chair, Banking and Debt Finance Practice omills@ssd.com Peer Review Rated martindale.com/c2c May 2008 25 http://www.martindale.com/c2c

Table of Contents Feed for the Digital Edition of Counsel to Counsel - May 2008

Counsel to Counsel - May 2008 Contents Harassment Policies NEC Corporation of America and Duane Morris LLP Lost or Stolen Data: Minimizing Fallout On-Boarding the Board Drafting Fair, Efficient and Enforceable Arbitration Agreements Responding to Counterfeit Products Crafting an English-Only Workplace Policy Distressed Debt: New Players, Global Sophistication Make Restructuring More Complex IP Confidential: Plan Ahead, Act Fast to Protect Your Trade Secrets Adverse Changes: Think Ahead in a Strained M&A Market Optimizing Web 2.0 Technology: Expanding Your Professional Network Union Pacific Railroad Company and Patton Boggs LLP Warming Warning: Develop Your Climate Change Strategy Now Risk Sharing: Expect New Obstacles and Expenses in Syndicated Loans E-Discovery in Action Diversification at the Gate Energy

Counsel to Counsel - May 2008

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