How to Negotiate New Arrangements with Target’s Creditors when Closing a Deal

How to Negotiate New Arrangements with Target’s Creditors when Closing a Deal


Mergers & Acquisitions
By: Howard A. Fine, Brian Sullivan

Mergers & Acquisitions published an article written by corporate special counsel Howard A. Fine and corporate associate Brian Sullivan. The article discusses the benefits of using bilateral letter of credit arrangements as an alternative approach in an acquisition closing context.

In a typical acquisition closing, the Target Company's debt must be paid off, and related liens released. To facilitate this process, an Acquiring Company often has to absorb any Target Company letters of credit which exist in the hands of third-party beneficiaries, including unfavorable pricing or other adverse terms which may exist – a necessary tradeoff, with the adverse L/Cs later dealt with on a post-closing basis. However, if the number or amount of Target L/Cs is large enough, another option exists: entering into new arrangements with the Target L/C banks to improve terms by, essentially, importing the L/Cs into the Acquiring Company's business. This article describes a recent transaction where this approach was used.

Click here to read the article.

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