Europe self liquidating loans

03-Sep-2020 12:00

Lenders will also want to know if the applicable jurisdictions’ insolvency laws generally are beneficial to them.As arrangers continue to push the envelope to provide creative structuring alternatives for their clients, the list of acceptable asset-based lending jurisdictions has expanded, with loans now including borrowing bases in the United States, Canada, United Kingdom, Ireland, Netherlands, France, Spain, Switzerland, Germany, Belgium, Australia and New Zealand, among others.Overall, therefore, it is crucial to find the optimum speed of NPL resolution, which is likely to differ among countries and between asset classes.As discussed by Constâncio (2017) and elaborated by Fell et al.For borrowers with international operations, the optimal asset-based loan structure would provide a single, worldwide borrowing base, available to support credit needs in every jurisdiction (regardless of the location of the operations’ financeable assets).In order to achieve such a structure, the borrowers and lenders must determine whether the laws of the applicable jurisdictions relating to creation, perfection and enforcement of security interests will allow the lenders to obtain expected recovery in a liquidation or restructuring (and whether those security interests are subject to priority claims).The attributes of asset-based loans suggest that corporate chief financial officers can anticipate an asset-based marketplace that will continue to adapt to provide flexible financing on favorable terms.

Instead, these are replaced with an unlimited general basket so long as the borrower maintains a specified level of excess availability and a fixed charge coverage ratio of not less than 1 to 1.

(Sometimes, if excess availability is sufficiently high, the fixed charge coverage test does not apply.) In addition, asset-based loan arrangers and lenders focus on preserving the core loan terms that are unique to an asset-based loan agreement and would not be found in cash-flow loan agreements, term loan agreements or bond indentures.