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Financing In-Transit Inventory: Legal Risks to Lenders

Structuring In-Transit Financing to Protect Lenders From the Risk of Borrower Insolvency

Recording of a 90-minute CLE webinar/teleconference with Q&A

Conducted on Wednesday, March 31, 2010
Recorded event now available

This CLE webinar will offer guidelines for counsel advising lenders dealing with in-transit inventory financing. The panelists will share their experiences on the key pitfalls presented by financing in-transit inventory and outline strategies for perfecting security interests and enforcing remedies.

Description

Lenders in asset-based loans often include a borrower’s inventory, including inventory in transit to the borrower from a foreign supplier, as part of a borrowing base under a revolving line of credit. Repayment of the loan is often secured by a lien on the inventory.

There are extensive legal risks in financing in-transit inventory, including insuring the goods; perfecting the lender's security interest in the inventory; and resolving claims to the inventory by a bankruptcy trustee, unpaid seller, carrier of the goods, NVOCC and customs broker.

In an environment in which loan defaults are soaring, counsel for lenders must work to ensure both that in-transit financings are properly perfected and that the lender is protected against inventory claims by third parties.

Listen as our panel of commercial finance attorneys discusses how to advise lenders regarding in-transit inventory financings. The panelists will explain the key legal pitfalls in financing in-transit inventory and suggest strategies for perfecting security interests and enforcing remedies.

Outline

Common legal issues arising when financing in-transit inventory
1. Prior liens of unpaid foreign sellers
2. Stoppage of goods in transit and reclamation
3. Effect of title retention by the seller
4. Risks in the use of negotiable bills of lading
5. Effect of bankruptcy of borrower
Practical considerations when structuring the financing transaction
1. Cargo insurance
2. Custom broker agreements
3. Agreements with carrier
4. Agreements with NVOCC

Benefits

The panel will review these and other key questions:

What are the legal risks to secured lenders participating in in-transit inventory financings when a borrower faces insolvency?
What steps should lenders take to properly perfect in-transit inventory financings?
What are best practices for lenders' counsel to protect against third-party claims to in-transit inventory?

Faculty

C. Edward Dobbs, Partner
Parker Hudson Rainer & Dobbs, Atlanta

His practice for more than 36 years has focused on documenting and closing commercial loans for banks and other financial institutions; representing financial institutions in debt restructurings, workouts and forbearance arrangements; and defending financial institutions in litigation regarding fraudulent conveyances, preferences and lender liability claims.

Thomas Hemmendinger, Of Counsel
Brennan Recupero Cascione Scungio & McAllister, Providence, RI

He concentrates in commercial loan documentation, Uniform Commercial Code matters, goods-in-transit issues, workouts, bankruptcies, and commercial litigation. He is the author of Hillman on Commercial Loan Documentation, 5th ed. (Practising Law Institute, New York) and a member of the Uniform Law Commission.

James C. Chadwick, Partner
Patton Boggs, Dallas

He is co-chair of the firm’s Business Department. He counsels domestic and foreign financial institutions, capital companies and private funds in leveraged acquisitions and leveraged recapitalizations, senior and subordinated debt, private placements, asset-based lending, equipment and project financings, secured and unsecured term lending and other forms of debt and equity financing.

Ordering

Online CLE

Includes audio streaming of full program plus handouts (available 24 hours after live seminar).

CLE: Pre-approved for participatory or non-traditional/alternate format credit in: CA, HI*, NY*, WV*. Pre-approved for self-study credit in: AK, AZ, MO, MT, TX, VT, WA.
Upon request, also available in: CO, CT*, FL, GA, ID, KY, LA, ME, NC, ND, NE, NH, NM, NV, OR*, SC, TN, UT, WI*, WY. If you are applying for credit in one of these states, make sure to select those states when placing your order.
(*Indicates that Strafford must report attendance.)

Online CLE Audio $74.50
Available 24 hours after the live event