Secured Lending: Negotiating and Interpreting Best Efforts, Ordinary Course of Business, and Anti-Assignment Provisions

Documenting Grant of Security Interest in Assets Subject to Anti-Assignment Clause and Interpreting Complex Covenants

A live 90-minute CLE webinar with interactive Q&A


Thursday, March 2, 2017 (in 5 days)
1:00pm-2:30pm EST, 10:00am-11:30am PST


This CLE webinar will provide guidance on structuring anti-assignment clauses in secured debt financing agreements and interpreting financing agreement terms that are often not properly understood, including “ordinary course of business,” “best efforts,” “reasonable best efforts” and “commercially reasonable efforts.”

Description

Debt finance counsel must know how to interpret anti-assignment provisions in contracts granting a security interest in an asset, license or permit. Since UCC Article 9 can modify restrictions on assignment, counsel must also understand the effect of modifications on lenders seeking a security interest in assets subject to anti-assignment provisions.

Counsel must also recognize what Article 9 “override” provisions do and do not accomplish, and how to structure and document the grant of security in assets subject to anti-assignment clauses. Consideration of rules governing assignment of contracts with the federal government is also key.

The interpretation of terms in debt agreements are often problematic, including terms such as “in the ordinary course of business” and “best efforts.” How ordinary does the transaction have to be? How are “best efforts,” “reasonable best efforts” and “commercially reasonable efforts” different? Drafting with clarity is critical.

Listen as our authoritative panel of debt finance attorneys offers guidance on effectively structuring and documenting the grant of a security interest in assets subject to anti-assignment provisions. The panel will offer practical approaches on drafting, negotiating and interpreting covenants using “best efforts” and “in the ordinary course of business” contract terms.

Outline

  1. Interpretation of certain common terms in debt agreements
    1. “Ordinary course of business”
      1. Common usage
      2. Case law guidance
      3. Recommendations
    2. “Best efforts,” “reasonable best efforts” and “commercially reasonable efforts”
      1. Common usage
      2. Case law guidance
      3. Recommendations
  2. Dealing with contractual and legal restrictions on assignment in the context of secured lending
    1. Contractual restrictions; interpretation of “assignment” and similar language
    2. Assignment of Claims Act
    3. FCC rules and recent case law
    4. The UCC “override” applicable to certain general intangibles and receivables assets—UCC Sections 9-406 through 408
      1. What the “override" does not do
      2. Important state variations and why they are important
      3. Related choice of law issues and documentation considerations

Benefits

The panel will review these and other issues:

  • How should finance counsel craft “best efforts”-style obligations in their agreements to clearly reflect the intent of the parties and not promise either too much or too little?
  • How do provisions in Article 9 of the UCC affect contractual and legal restrictions on assignment in connection with grants of security interests in debt financings?
  • What are some ways secured lenders can structure the grant of security in assets subject to anti-assignment provisions in order to maximize the strength of their collateral position without violation of underlying restrictions?

Faculty

Yair Y. Galil, Of Counsel
Gibson, Dunn & Crutcher, New York

Mr. Galil is a member of the firm’s Global Finance Practice Group. He has represented a variety of clients in complex financing transactions, including sponsors, issuers, financial institutions and investment funds. The business contexts for these transactions have ranged from ordinary-course credit increases and refinancings to pivotal credit such as acquisition financings and debtor-in-possession and bankruptcy exit financings, as well as special-circumstances transactions such as debt buybacks and covenant relief amendments.

Darius J. Mehraban, Partner
Gibson Dunn & Crutcher, New York

As a member of the firm's Global Finance Group, Mr. Mehraban focuses on loan and debt financing transactions, and swaps and other derivative transactions. His debt finance experience includes syndicated credit facilities for leveraged and investment grade borrowers, project and equipment financings, acquisition credit facilities, high-yield and convertible notes, and leasing and structured finance transactions.


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