Structuring Leveraged Loans After Tax Reform: Concerns for Multinational Entities

Section 956 Deemed Dividend Rules, Limits on Interest Deductions, Tax Distributions, Corporate vs. Pass-Through Borrowers

Note: CPE credit is not offered on this program

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

Conducted on Thursday, February 14, 2019

Recorded event now available

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Program Materials

This CLE webinar will examine the impact of tax reform on leveraged financing transactions. The panel discussion will include how the new law might affect credit support between affiliates in multinational enterprises, structuring and placement of debt, interest deductibility, and provisions regarding prepayment and permitted tax distributions.


Tax reform and other recently proposed regulations have made significant changes to the tax rules that impact leveraged finance transactions. Counsel to both borrowers and lenders need a working knowledge of these changes concerning both existing and future loans.

New limitations on the deductibility of interest may force leveraged companies to reconsider their global capital structure and pursue measures such as paying off debt held by U.S. entities and moving debt offshore to foreign affiliates. With the reduction in the corporate tax rate and the application of a new special passthrough tax rate, lenders and borrowers will likely revisit how tax distribution provisions are negotiated and drafted.

Various rules impacting multinationals will affect collateral packages, and may also impact mandatory prepayment provisions. Lenders may ask borrowers to repatriate foreign proceeds to make prepayments, although the parties will still need to consider state or non-U.S. withholding taxes that could be triggered.

Tax reform changes to the rules relating to controlled foreign corporations (CFCs) will cause some entities to become CFCs that weren't before. For some multinational groups, this may result in additional subpart F income to U.S. shareholders and may also have the effect of shrinking the base of credit support available in a leveraged loan.

Listen as our authoritative panel examines these and other leveraged loan structuring issues after tax reform. The panel will also discuss adjustments that should be made to loan documentation to minimize tax exposure for the borrower while protecting the lender.



  1. Tax reform: an overview of new provisions, new tax rates
  2. New limitations on the deductibility of interest
  3. Impact on multinational groups
  4. Impact of participation exemption and proposed 956 regulation on credit support where corporate U.S. shareholders
  5. More foreign entities deemed CFCs: effect on credit support to noncorporate U.S. shareholders
  6. Tax distribution and prepayment provisions


The panel will review these and other key issues:

  • What are some of the implications of tax reform and other recently proposed regulations for multinational enterprises seeking leveraged financing?
  • To what extent do the proposed 956 regulations allow foreign affiliates more flexibility in providing credit support to US borrowers without triggering adverse tax consequences? Will lenders begin to require such credit support?
  • How might the reduced corporate and special passthrough tax rates affect tax distribution provisions for borrowers that are taxed as corporations and borrowers that are taxed as partnerships?
  • Why might lenders now require borrowers to make prepayments with foreign proceeds?
  • How will new rules defining CFCs impact the ability of multinational borrowers that use specific sources of credit support?


Crouch, Laurence
Laurence Crouch

Shearman & Sterling

Mr. Crouch focuses on transactions with extensive experience in tax matters. His tax practice involves virtually every...  |  Read More

Kim, Anne
Anne Kim

Proskauer Rose

Ms. Kim’s practice focuses on advising public and private companies in both taxable and tax-free mergers and...  |  Read More

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