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Thomas D. KearnsOlshan Frome Wolosky LLP If you find this article helpful, you can learn more about the subject by going to www.pli.edu to view the on demand program or segment for which it was written. |
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For larger secured loans securitized lenders often ask for an opinion of counsel that the borrower will not be consolidated with other affiliated entities in the event of a bankruptcy filing by the borrower or its affiliates. Here are the basic issues to be addressed before drafting the opinion.
1. | The borrower’s organizational chart must be reviewed to determine the parties that will need to be included in the opinion (known as the pairings); |
2. | Review the organizational documents of the borrower to ensure that the appropriate separateness provisions are included; |
3. | Review the loan documents and, in particular, any guarantees, which represent “bad facts” such as full recourse guarantees for purposes of giving a non-consolidation opinion; and |
4. | If the borrower is not a newly formed entity, additional due diligence may be required and a certificate is typically obtained with respect to prior conduct. |