USA Law and Practice Contributed by: Nicholas A Dorsey, Ryan J Patrone, Kelly M Smercina and Margaret R M Rallings, Cravath, Swaine & Moore LLP
2.2 Use of Loan Market Association (LMA) Agreements or Other Standard Loans In the USA, there is no standard form of doc- umentation for loans or the issuance of debt securities. However, certain industry groups – for example, the Loan Syndications & Trading Asso- ciation (LSTA) in the case of loan documentation, and the Securities Industry and Financial Markets Association (SIFMA) in the case of investment grade debt securities – have developed certain model clauses. In US acquisition financings, the documentation is typically based on the finan- cial sponsor’s form documents, if applicable, the lead arranger’s or underwriter’s form documents, a precedent transaction previously undertaken by the acquirer or a precedent transaction with similar transaction characteristics that is agreed by the parties. Please see 2.1 Governing Law for a discussion of standard agreements. 2.3 Language US acquisition finance documentation is pre- pared in the English language. 2.4 Opinions Credit Agreement Legal Opinions US credit agreements typically include a condi- tion to closing that the borrower’s counsel has delivered customary legal opinions addressed to the lenders and applicable agents, including the administrative agent and, if applicable, collateral agent. Common opinions include: • due authorisation and enforceability of the loan documentation; • valid existence and good standing of the bor- rower and the guarantors; “no conflicts” with organisational documents, applicable law or
For secured facilities, legal opinions will also often cover the proper grant and perfection of security interests. In the USA, legal opinions are typically provided only by counsel to the borrower, not by coun- sel to the lenders. In multi-jurisdictional trans- actions, counsel from each jurisdiction where a guarantor is incorporated or security is granted will be expected to deliver an opinion to the lenders. Debt Securities Legal Opinions Underwriting or purchase agreements typi- cally include a condition to closing that each of the issuer’s and the underwriters’ counsel has delivered customary legal opinions addressed to the underwriters. The scope of these opin- ions is substantially similar to opinions provided for a loan (although, as noted in 2.1 Governing Law , for a loan it is typically only the borrower’s counsel that delivers an opinion). In the case of a securities offering registered with the SEC, the issuer’s counsel will also deliver an opinion addressed to the issuer confirming the legality of the securities; this opinion will be publicly filed with the SEC. Both the issuer’s counsel and the underwriters’ counsel will also deliver negative assurance letters following a customary due dili- gence investigation.
3. Structures 3.1 Senior Loans
Debt structures commonly used for US acqui- sition finance include senior secured debt and senior unsecured debt. Senior subordinated debt is also used, though with less frequency.
material contracts; and • no required consents.
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