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How To Avoid Pitfalls In Borrowing Base Transactions

Webinar: ID# 1021505
Recorded CD
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About This Course:
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 webinar helps the person responsible for ensuring that the borrowing base is "correct". It also helps identify the most common pitfalls arising from the borrowing base assets so you can avoid potential problems.

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
About The Presenter

Katherine E. Bell
  • Partner in the Finance and Restructuring practice of Paul Hastings LLP and is based in the firm’s 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
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How To Avoid Pitfalls In Borrowing Base Transactions
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