Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Second Circuit: Notes Issued from Syndicated Loan Transaction Are Not Securities Under 'Reves' Test
Syndicated loans are regularly used to raise large amounts of capital to finance business ventures. Depending upon how the syndication is structured, there is risk that the facility could be viewed as a security offering thereby injecting a significantly greater level of regulatory oversight into the transaction. In an important recent decision, the U.S. Court of Appeals for the Second Circuit reviewed a $1.7 billion syndicated loan and provided a helpful analytical framework for determining whether applicable securities laws were called into play. See, Kirschner v. JP Morgan Chase Bank, 2023 U.S. App. LEXIS 22327 (2d Cir. Aug. 24, 2023). In so doing, the court affirmed the U.S. District Court for the Southern District of New York's decision that notes issued from the syndicated loan transaction were not securities under the application of the test set forth in the U.S. Supreme Court's decision in Reves v. Ernst & Young, 494 U.S. 56 (1990).
In March 2014, JP Morgan Chase Bank and certain other institutional lenders (the initial lenders) agreed to provide Millennium Health LLC, Inc., a urine drug testing company, with a $1.775 billion term loan and a $50 million revolving loan. Millennium intended to use the term loan proceeds to retire an outstanding credit facility, make a large shareholder distribution, "redeem outstanding warrants, debentures and stock options," and pay fees related to the transaction. The Initial Lenders and Millennium agreed that the term loan could be syndicated to lenders identified by the "lead arrangers" — JP Morgan Securities and Citigroup Global Markets. The lead arrangers prepared a confidential information memo about Millennium and the syndicated transaction offer. On April 15, 2014, lenders were informed of the amount of their allocations based on their legally binding offers and the lenders became bound to purchase their allocations. The transaction closed on April 16, 2014 in a series of three contemporaneous steps: JP Morgan Chase funded the term loan; JP Morgan Chase assigned, with Millennium's consent, rights and obligations with respect to the Term Loan to the lenders; and the individual lenders purchased their term loan allocations. Ultimately, there were more than 400 institutions that held a part of the syndicated loan.
This premium content is locked for Entertainment Law & Finance subscribers only
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
- Stay current on the latest information, rulings, regulations, and trends
- Includes practical, must-have information on copyrights, royalties, AI, and more
- Tap into expert guidance from top entertainment lawyers and experts
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs
A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It
Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.
Blockchain Domains: New Developments for Brand Owners
Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.