Structuring Secured Lending Transactions: Key Provisions, Anti-Assignment and Other Complex Covenants

Interpreting Best Efforts, Ordinary Course, Business Judgment, Reasonable Discretion

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

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Conducted on Thursday, June 30, 2022

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Course Materials

This CLE webinar will help counsel interpret loan document terms that are often not adequately understood, including "ordinary course of business," "best efforts," "reasonable best efforts," "commercially reasonable efforts", "business judgment" and "reasonable discretion." The panel will also discuss drafting and interpreting exclusions from collateral for assets that are subject to restrictions on being pledged by the loan parties.

Description

The interpretation of terms in loan documents such as "in the ordinary course of business", "best efforts" and "business judgment" can be problematic. How ordinary does the transaction have to be? How are "best efforts," "reasonable best efforts," and "commercially reasonable efforts" different? What is "business judgment"? Drafting with clarity is critical.

Commercial finance counsel must know how to draft and interpret exclusions from collateral for contracts and other assets that are subject to restrictions on assignment and/or prohibited from being pledged. UCC Article 9 has "override" language regarding such provisions that apply in certain circumstances.

Listen as our authoritative panel of commercial finance attorneys offers practical approaches on drafting, negotiating, and interpreting covenants using "best efforts", "in the ordinary course of business", "business judgment" and "reasonable discretion" contract terms. The panel will also offer guidance on dealing with contractual and legal restrictions on assignment and security interests in the context of secured lending.

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Outline

  1. Interpretation of common terms in loan documents
    1. Ordinary course of business
    2. Best efforts, reasonable best efforts, and commercially reasonable efforts
    3. Business judgment
    4. Reasonable discretion
  2. Dealing with contractual and legal restrictions on assignment and security interests in the context of secured lending
    1. Examples of assets with restrictions on being pledged
    2. The UCC "override" applicable to certain 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
    3. Traps for the unwary

Benefits

The panel will review these and other questions:

  • How should commercial finance counsel craft "best efforts" or "business judgment" -style obligations in their agreements to reflect the intent of the parties and not promise either too much or too little?
  • What are the traps for the unwary in exclusions from collateral for assets that are subject to restrictions on assignment or security interests?
  • What are some ways secured lenders can structure the grant of security in assets subject to restrictions on assignment or security interests to maximize the strength of their collateral position?

Faculty

Hildebrandt, Jennifer
Jennifer B. Hildebrandt

Partner, Corporate Department
Paul Hastings

Ms. Hildebrandt represents banks, commercial finance companies, hedge funds, and other lenders in commercial and...  |  Read More

Ross, Christopher
Christopher G. Ross

Partner, Corporate Department
Paul Hastings

Mr. Ross' practice focuses on representing U.S. and foreign financial institutions and corporations in leveraged...  |  Read More

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