USA – RHODE ISLAND Trends and Developments Contributed by: Amy T. M. Oakley, Partridge Snow & Hahn LLP
Risk/Reward for Bridging State Tax Credits Lenders should not shy away from bridging State Tax Credits. They should, however, hire counsel to fully review the state tax credit programme to assess the true value and transferability of the credits and to advise as to the risks associated with the particu- lar credit programme and how best to mitigate those risks. State Tax Credit Bridge Loans represent a signifi- cant opportunity for lenders willing to understand the nuances of these financing structures. With proper due diligence, experienced counsel, and careful atten- tion to programme compliance requirements, these transactions can provide competitive returns while helping developers bridge critical financing gaps in today’s challenging market. As state incentive pro- grammes continue to expand and evolve, lenders who develop expertise in this area will be well positioned to capture market share in the growing development finance sector.
the shoes of the Project LLC and complete the pro- ject; and (ii) to confirm that the lender cannot foreclose on the subject property or to agree to certain restric- tions on foreclosure. If the lender is providing the State Tax Credit Bridge Loan but is not providing the senior debt, the lender should also enter into an Intercreditor and Subordina- tion Agreement with the senior lender. The State Tax Credit Bridge Lender should be careful to carve out its first priority interest in and to the State Tax Cred- its, and ensure that any payment subordination in a default scenario does not include repayments to the State Tax Credit Bridge Loan lender from a State Tax Credit source.
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