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Potential Pitfalls in Borrowing Base Transactions

In many transactions, the borrowing base assets raise issues that are unique to the particular industry of the borrower.

Many bankers and practitioners utilize form language when drafting a borrowing base into the credit agreement without tailoring the borrowing base to the specifics of the transaction. This is a dangerous approach. In many transactions, the borrowing base assets raise issues that are unique to the particular industry of the Borrower. Without a full understanding of the industry, an informed analysis of the diligence results related to the borrowing base assets, and knowledge of applicable law, the Borrowing Base likely will be fraught with potential issues. These issues could result in a breach of contract action against the Agent by the borrower or the syndicate of lenders. This topic helps the person responsible for ensuring that the borrowing base is correct identify the most common issues arising from the borrowing base assets and address these issues before the deal closes. This topic also provides tips to better align the actual borrowing base with the borrowing base that has been drafted into the credit agreement.

Runtime: 89 minutes
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Over 31 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Agenda

Accounts Receivable in the Borrowing Base

  • Accounts Receivable vs. Real Property Rents
  • The Problem With Chattel Paper
  • Contract Receivables and Contra Accounts
  • Accounts Receivable as ABL Priority Collateral in Split Collateral Deals
  • A Mismatch Between Reality and the Contract Could Result in Breach of Contract
  • The Interplay Between Reporting and the Borrowing Base

Inventory in the Borrowing Base

  • Trademarked Inventory
  • Patented Inventory
  • A Mismatch Between Reality and the Contract Could Result in Breach of Contract
  • The Interplay Between Reporting and the Borrowing Base
  • Book Value vs. Fair Market Value

Cash in the Borrowing Base

  • Issues and Tips
  • Proceeds of Accounts Receivable vs. Proceeds of Other Asset Classes

Equipment

  • Book Value vs. Fair Market Value
  • Depreciation Between Appraisals
  • Equipment Financed to Third Parties

Article 9 vs. Federal Regimes

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Why Lorman?

Over 31 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Credits

OnDemand Webinar

This program format does NOT qualify, nor meet the National Standard for NASBA accreditation.

Audio & Reference Manual

  • AK CLE 1.5
     
  • Arizona CLE 1.5
     
  • CA MCLE 1.5
     
  • CT CLE 1.5
     
  • GA CLE 1.5
     
  • HI CLE 1.5
     
  • IL CLE 1.5
     
  • ME CLE 1.5
     
  • MO CLE 1.8
     
  • MT CLE 1.5
     
  • NJ CLE 1.8
     
  • NM CLE 1.5
     
  • NV CLE 1.5
     
  • NY CLE 1.5 including Areas of Professional Practice 1.5
     
  • UT CLE 1.5
     
  • VT CLE 1.5
     
  • WA CLE 1.5
     
  • WV MCLE 1.8
     
The CLE Code is ONLY a requirement when applying for CLE Credit in California (for participatory credit), Kansas, New Jersey or New York. Other states do not need to supply the CLE Code to apply for CLE credit.

This program format does NOT qualify, nor meet the National Standard for NASBA accreditation.

MP3 Download

  • AK CLE 1.5
     
  • Arizona CLE 1.5
     
  • CA MCLE 1.5
     
  • CT CLE 1.5
     
  • HI CLE 1.5
     
  • IL CLE 1.5
     
  • ME CLE 1.5
     
  • MO CLE 1.8
     
  • MT CLE 1.5
     
  • NJ CLE 1.8
     
  • NM CLE 1.5
     
  • NV CLE 1.5
     
  • NY CLE 1.5 including Areas of Professional Practice 1.5
     
  • UT CLE 1.5
     
  • VT CLE 1.5
     
  • WA CLE 1.5
     
  • WV MCLE 1.8
     
The CLE Code is ONLY a requirement when applying for CLE Credit in California (for participatory credit), Kansas, New Jersey or New York. Other states do not need to supply the CLE Code to apply for CLE credit.

This program format does NOT qualify, nor meet the National Standard for NASBA accreditation.

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Why Lorman?

Over 31 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Faculty

Katherine E. Bell

Katherine E. Bell

Paul Hastings LLP

  • Partner in the Finance and Restructuring practice of Paul Hastings LLP and is based in the firmís Orange County office
  • Practice focuses on commercial and corporate finance transactions
  • Regularly represents banks, finance companies, other lenders, and borrowers in working capital facilities (asset-based and cash flow), acquisition financings, and other leveraged finance transactions and restructurings
  • Negotiated intercreditor relationships across a variety of structures, including 1st lien/2nd lien transactions, split collateral arrangements, and unitranche structures; has industry experience in a variety of business sectors and has considerable experience in cross-border transactions
  • Recently co-wrote Asset-Based Lending: A Practical Guide to Secured Financing
  • Practising Law Institute, 8th ed. 2015, which is generally considered to be the definitive treatise on asset-based lending
  • Conducts regular seminars and workshops on asset-based lending, credit agreements, intercreditor agreements, split collateral intercreditor arrangements, trends in commercial loan documentation, unitranche facilities, interplay between the Uniform Commercial Code and Bankruptcy law, and intellectual property lending
  • Wrote several publications related to the areas of asset-based lending, intercreditor arrangements, and commercial finance
  • J.D. degree, Cornell Law School; B.A. degree, University of California at Irvine
  • Can be contacted at 714-668-6238 or [email protected]
Jennifer S. Yount

Jennifer S. Yount

Paul Hastings LLP

Jennifer Yount

  • Partner in the office of Paul Hastings LLP
  • The chair of Paul Hastings LLP Finance and Restructuring practice and is based in the firmís New York and Los Angeles offices
  • Practice primarily consists of representing banks, finance companies, and other lenders in working capital financings (asset-based and cash flow), acquisition financings, bank/bond transactions, restructurings, and debtor in-possession and exit financings
  • Drafted and negotiated many borrowing bases; has also drafted and negotiated intercreditor and subordination agreements in 1st Lien/2nd Lien, split collateral, and mezzanine financings and agreements among lenders; has industry experience in a variety of business sectors and has extensive experience with international transactions
  • Conducts regular seminars and workshops on asset-based lending, agreements among lenders, comparisons of intercreditor agreements, subordination agreements, commit-ment letters, acquisition finance transactions, fraudulent transfers, and nondisclosure agreements
  • Wrote several publications related to the areas of asset-based lending, intercreditor arrangements, unitranche credit facilities, and bankruptcy
  • J.D. degree, Southwestern University School of Law; B.A. degree, University of California Santa Barbara
  • Can be contacted at 212-318-6008 or [email protected]
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Product ID: 394213
Published 2016, 2018
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