Practices: Credit and Liquidity Enhancement

In the past two decades commercial lenders and other financial institutions have increasingly provided credit and liquidity enhancement to a wide range of tax-exempt financial instruments, including general obligation and special purpose bonds as well as economic development financing and derivative products. These credit enhancement transactions are a challenge for any financial institution because public entities are governed by different laws and have very different rights and obligations than private borrowers. These include restrictions on remedies that may be enforced against them and highly complex rules governing the perfection of security interests and any possible default. If your organization wishes to pursue credit enhancement transactions, you need the guidance of lawyers who understand commercial lending objectives in the context of specialized public finance concerns.

Proven Ability

Ungaretti & Harris knows how to meet the needs of enhancers, underwriters and issuers. Our advice to financial institutions as credit enhancers is part of our overall counsel to them as lenders, underwriters and servicers. Major credit enhancers such as JP Morgan, Chase Bank, N.A. and LaSalle Bank, N.A. have relied on our proven ability to handle the complex, innovative transaction, as well as the routine transaction where controlling costs is essential. As advisers on credit enhancement arrangements, our lawyers work with you to handle the documentation and negotiation of the financing instrument, as well as all aspects of lender due diligence.

Creditors’ Rights

While private obligations are usually backed by the general credit and specific collateral of the borrower, public entities use a variety of limited obligation security structures as part of their financing transactions. Having dealt with both sides of the transaction, our lawyers have a clear understanding of how to protect the lender’s interests within the public borrower’s legal requirements. If your organization undertakes a credit enhancement role, we review the bond documents to ensure that all your rights as a creditor are fully protected. When necessary we have handled the restructuring and workout of credit enhancement arrangements, including the divestiture or sale of non-performing assets.

Transactional Breadth

Credit enhancement transactions often involve a wide range of financing instruments and structures. You can rely on our assistance, not only with general obligation bonds, but with public infrastructure bonds, certificates of participation, tax increment financing, sales tax bonds, tax and revenue anticipation notes, and derivative products. No matter what the transaction involves, we ensure that your interests as lender are protected in the negotiation and documentation of all credit and liquidity facilities. That includes:

• Reimbursement agreements.
• Standby bond purchase agreements.
• Pledge and collateral agreements.
• Participation agreements.
• Investment agreements.

Skilled Advisors

As a lender, what you want most from a law firm is the ability to protect your interests in a credit enhancement transaction, to make the deal as straightforward and seamless as possible, and to strengthen your business relationship with the borrower. Ungaretti & Harris public finance lawyers know how to meet your objectives, in our role as skilled advisors who can help all parties reach their objectives.