Data and precedent play a key role in your ability to structure, negotiate and document lending transactions. In cross-border deals, access to this data is especially essential and can be more challenging to locate. Laura Jakubowski of Goldberg Kohn provides the information you need to arm yourself with vital information. 

The ability to leverage key precedent and transaction data is essential to structuring, negotiating and documenting lending transactions.  This is particularly true in the world of cross-border asset-based financing, where new transaction structures and jurisdictional arrangements continue to emerge as borrowers expand their operations to access new geographical markets. 

For a cross-border asset-based loan, it is essential to understand the nuances of the markets in which the company is operating, both from a practical and a legal perspective. This understanding is key both for lenders who are considering the overall lending landscape when initially considering a transaction, as well as for lawyers who are documenting a cross-border loan. For cross-border transactions involving U.S. parent companies, lenders have the great advantage of access to a wealth of public information through filings made with the Securities and Exchange Commission (SEC).  In most cases, such public companies that close new financing facilities or make significant amendments to existing facilities are required by U.S. law to disclose details about the transactions, which usually includes filing full copies of key credit documents.  The filed credit documents are available to the public through the SEC’s online database, EDGAR (Electronic Data Gathering, Analysis and Retrieval), which includes access to public company filings dating back to 1994.  

A review of credit agreements that are publicly available through EDGAR can serve various key purposes for cross-border ABL lenders and the lawyers who represent them in these transactions, including the following:

Identification of key jurisdictions: Data from public documents can show the jurisdictions that are most frequently part of a cross-border deal structure, how this has evolved over time, and whether any recent precedent exists for certain jurisdictions that are less frequently included in cross-border loans.  It is often informative to investigate lending structures in certain countries, and in particular whether such entities are designated as borrowers or guarantors, and/or whether availability under the facility is predicated on such entity’s assets.

Identification of key currencies: There also may be operational and/or legal challenges posed by lending in a particular currency.  Data from cross-border credit agreements is helpful in identifying the currencies that are most frequently used and ostensibly easier to administer and, for those that are less frequently used, whether there is any recent precedent for that currency and how the applicable provisions are drafted.  

Borrowing base structures: It is instructive to review any public precedent that exists for a particular jurisdiction to determine exactly how the borrowing base is structured. Is the borrowing base fully consolidated across all jurisdictions, do the entities in each country have a separate borrowing base, or is the borrowing base consolidated for entities in some countries and not in others? There are often legal and practical limitations behind how the borrowing base is structured that are common across different transactions involving the same or a similar mix of jurisdictions, so reviewing borrowing base structures from precedent transactions can help to identify key structuring issues.

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