Published: October 2016Contents
i) What are the hot topics?
One hot topic is convergence: the restrictions on a borrowing group imposed by loans becoming more like high-yield bonds and therefore less restrictive, and convergence of international finance terms on US market terms.
Also of importance is whether or not financing terms and structures should be adapted to reflect differing outcomes for different classes of creditors owing to differences in legal jurisdictions.
Finally, whether institutional lenders can lend in a given jurisdiction on an equal basis with domestic banks, including free from withholding tax on the interest payments, and if not, whether structural solutions for the financing are permitted, can be considered a hot topic.
ii) Tell us about any key legal developments – recent or pending – and their international impact.
Brexit – the recent referendum vote in Britain to leave the EU – will have legal ramifications that are difficult to predict until legislative responses take place, but in the leveraged finance space raises questions including whether English law will retain its popularity for international finance (my prediction is that it will but this is by no means a given), and how financial institutions will need to adapt if existing regulation and licences in England no longer provide passporting rights in the EU under the terms (if any) negotiated as part of an exit from the EU. In addition, US leveraged lending guidelines apply to US banks on a worldwide basis, and are having a noticeable impact on the market outside the US for certain leveraged financings.
iii) What are the biggest opportunities and challenges for practitioners and clients?
Continuing changes in markets and the underlying tax, insolvency and commercial laws mean practitioners need to keep abreast of developments, but also enable them to provide creativity and add real value in the services they provide to their clients. Clients need to plan for changes in regulation but the changes are also an opportunity as those clients that adapt the best should see disproportionate returns.
Latham & Watkins LLP New York
Latham & Watkins LLP London