USA Law and Practice Contributed by: Stelios Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins
2. Regulatory Environment 2.1 Licensing and Regulatory Approval While no US federal regulatory framework applies to non-bank lenders that are engaged in commercial lending in the United States, a few US states require non-bank lenders to obtain a licence before engaging in commercial lending activities (ie, lending activities between corporate lenders and corporate or institutional borrowers for business or commercial purposes) under certain circumstances. The commercial lending licensing requirements of some of these states are generally only triggered when a commercial loan is secured by real property located in the state. In our experience, California is the state most often implicated in the commercial lending context due to the broad scope of California’s commercial lender licensing requirement. The US states that may impose commercial lend - ing licensing requirements (unless an exemption from such licensing requirements applies), gen - erally include California, Florida, Nevada, North Dakota, South Dakota and Vermont. While New York has a commercial lending licens - ing requirement, the requirement only applies to business and commercial loans in the principal amount of USD50,000 or less that also meet other specified conditions. 2.2 Regulators of Private Credit Funds Certain US state banking regulators are the pri - mary regulators for private credit activity in the United States. 2.3 Restrictions on Foreign Investments Special rules may apply depending on the industry and asset. Generally speaking, typical areas of regulatory approval for acquisitions (or financings thereof) include US antitrust regula - tions, foreign direct investment laws applicable
to the industry and asset (for example Commit - tee on Foreign Investment in the United States (CFIUS) approvals), along with customary sanc - tions, anti-money laundering and KYC rules that apply to lenders generally. 2.4 Compliance and Reporting Requirements Private credit providers may have specific reporting requirements to their investors and to regulators depending on the vehicle utilised. For example, business development companies (BDCs) arranged by private credit providers may have to meet specific disclosure and reporting requirements. 2.5 Club Lending and Antitrust Private credit providers are able to provide sole underwrites or club deals for large multibillion- dollar transactions on terms that are competi - tive. This approach of forming clubs to facilitate larger transactions has not raised any regulatory impediment. 3. Structuring and Documentation 3.1 Common Structures In recent years, we have seen the size of private credit transactions continue to grow while the dry powder available for deployment by such direct lenders has simultaneously increased. Increasingly Shorter Process The timeline for transactions in the private credit space is consistently shrinking. In recent times, sponsors have increasingly elected to equity back-stop new acquisitions and skip a commit - ment letter process and move directly into the credit agreement negotiation instead. Of course, this type of process would not be possible in the syndicated market.
329 CHAMBERS.COM
Powered by FlippingBook