Finance

Originally published June 10, 2020.  Last updated on November 3, 2020. On October 22, 2020, the Federal Reserve Bank of New York (“New York Fed”) released an amended form of Master Loan and Security Agreement (the “MLSA”), which governs loans issued under its Term Asset-Backed Loan Facility (“TALF”).  The amendments will be effective as of November 5, 2020.  The New York Fed also updated its Frequently Asked Questions (“FAQs”) on October 22, 2020 to reflect the changes made to the MLSA, and further updated the FAQs on November 2, 2020.  These amendments include, among other things, a provision creating certain…
In response to the COVID-19 epidemic, the U.S. government has provided relief to companies through various grant programs.  The receipt of these grant proceeds represents a meaningful lifeline to many companies and the revenue provided by these grants can have a significant impact on their accounting statements (including GAAP and non-GAAP financial calculations).  Similarly, such financial determinations may also impact various provisions of these companies’ credit facilities, particularly in the private credit space.  Revenue calculations are key to determining a company’s consolidated net income and EBITDA, which are then used to determine such company’s financial covenant compliance and incurrence capacity…
Beyond its devastating human toll, the COVID-19 pandemic has had a historic impact on the U.S. economy, causing tens of millions of Americans to lose employment and numerous businesses to temporarily or permanently shutter. This presents an environment ripe for distressed M&A activity. Will U.S. antitrust law stand in the way of the economic forces spurring such consolidation? U.S. antitrust enforcers have historically viewed industry consolidation suspiciously, considering it better to let troubled businesses naturally run their course. But does that view apply in the context of a rapid economic downturn, particularly where the underlying cause is an environmental health…
For many sponsor-backed and other highly leveraged private companies, the business impact of COVID-19 is just beginning to apply pressure to financial covenant compliance.  As borrowers and private credit (or other) lenders think through options on how best to address pending or anticipated defaults, structured preferred equity should be considered as a versatile tool in the toolbox. Structured preferred equity can take different forms but is generally characterized as equity filling gaps between traditional equity and debt positions on a balance sheet. Whether consideration for covenant holidays, right-sizing balance sheets through debt for equity swaps or a method of “handing…
Since the enactment of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020, millions of businesses have applied for and received a Paycheck Protection Program (the “PPP”) loan from the U.S. Small Business Administration (the “SBA”) (for the current terms, laws and rules governing the PPP see our client alert:  Paycheck Protection Program – Where Are We Now?).  Recipients of PPP loans (“PPP Recipient”) that are the subject of a subsequent Sale Transaction[1] will likely be at risk of heightened scrutiny by the SBA and other relevant government agencies, the public, and…
On May 12, 2020, the Federal Reserve published an updated Term Sheet and a set of Frequently Asked Questions (“FAQs”) for the Term Asset-Backed Securities Loan Facility (“TALF”). The TALF program, which was first announced on March 23, 2020 and updated on April 9, 2020, will provide a funding backstop for eligible asset-backed securities (“ABS”). The updated Term Sheet and the FAQ provide significant additional details about the terms of the program, including borrower and issuer eligibility, eligible collateral and certain operational details. The Federal Reserve has not yet announced start dates for the TALF program. This alert discusses key…
A recent, highly anticipated ruling by a Bankruptcy Court in Delaware has reilluminated the concept of a “golden share”. While an appeal of the ruling seems likely, this latest ruling by Delaware Bankruptcy Judge Mary F. Walrath suggests that as the COVID-19 outbreak continues to disrupt businesses and send shockwaves through the economy, courts may look at the specific circumstances of each case and weigh the interests of all corporate stakeholders in determining whether to enforce a “bankruptcy blocker”. What is a “Golden Share”? A “golden share” refers to an equity interest in a company that affords the owner a…
As COVID-19 sends shockwaves through the global economy, many experts are predicting one of the deepest recessions in U.S. history.  The hospitality, employment services, transportation, travel, leisure, mining, and oil industries have been particularly hard hit, but borrowers in a myriad of industries have, or will, feel the fallout from this pandemic.  Private credit lenders will be receiving first quarter financial reporting from borrowers in the coming weeks and the first effects of declining revenues will be apparent.  Many borrowers will be looking for ways to counteract the effects of lost revenues in their financials, or will risk EBITDA-based financial…
Many markets, including the private credit markets, are facing market declines, disruptions and dislocations stemming from the policies enacted to combat the ongoing spread of COVID-19. The private credit industry has seen rapid growth in the years following the financial crisis of 2008 as banks pulled back from issuing loans to certain borrowers and private credit funds built up record levels of assets under management in recent years. Asset managers are now facing a potential decline in the value of their debt portfolios due to the short term and long term effects of the global pandemic. While certain credit providers…
A month has passed since the outbreak of the COVID-19 pandemic in the United States. The virus has impacted almost every facet of our lives, creating chaos in the financial markets, emptying Main Streets across the nation and changing our daily routines. Unsurprisingly, private credit lenders and their borrower clients have not been left unscathed. Private credit lenders were forced to respond to urgent and rapidly changing circumstances, requests for immediate cash and other relief; encouragingly private credit lenders have thus far shown great resiliency in the face of these challenges. Pre-COVID-19. Private credit lenders were well-served by anticipatory actions…
Appropriation $349B   $500B Eligibility Available to small business concerns and any other business concern with no more than 500 employees (or, with respect to accommodation and food service businesses, 500 employees per physical location) Affiliation rules are disregarded for (i) any accommodation or food service business concern with less than 500 employees, (ii) any business concern that is a franchise, and (iii) any business concern that receives financial assistance from an SBIC fund Available to any employer whose operations were fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority due to COVID-19…
The unexpected emergence of the COVID-19 virus presents a wide range of new challenges and opportunities. The initial reaction of the syndicated market has been to pull back. In these times, private credit lenders act as ready sources of capital and liquidity in creative structures. At the same time, prudent private credit lenders are stress testing their existing portfolio.  As private credit lenders consider the opportunities and risks that COVID-19 presents on new and existing portfolio financings, we wanted to highlight a few unique considerations. Leveraged Acquisition Financings: The current COVID-19 environment could present opportunities for private credit lenders to…