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presents
Opinion Letters in Commercial Lending Transactions
presents
gDrafting and Negotiating UCC, Securitization, and
Entity and Contract OpinionsA Live 90-Minute Teleconference/Webinar with Interactive Q&A
Today's panel features:Steven O. Weise, Partner, Proskauer Rose, Los Angeles
Christine Gould Hamm, Partner, Husch Blackwell Sanders, Kansas City, Mo.Jason Arbuck Partner Cassels Brock & Blackwell Toronto Canada
A Live 90-Minute Teleconference/Webinar with Interactive Q&A
Jason Arbuck, Partner, Cassels Brock & Blackwell, Toronto, Canada
Thursday, June 17, 2010
The conference begins at:1 pm Eastern12 pm Central
11 am Mountain10 am Pacific
You can access the audio portion of the conference on the telephone or by using your computer's speakers.Please refer to the dial in/ log in instructions emailed to registrations.
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• closing the notification box • and typing in the chat box your• and typing in the chat box your
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• If the sound quality is not satisfactory• If the sound quality is not satisfactory and you are listening via your computer speakers please dial 1-866-258-2056speakers, please dial 1 866 258 2056 and enter your PIN when prompted. Otherwise, please send us a chat or e-, pmail [email protected] so we can address the problem.
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O i i l tt i Opinion letters in commercial lending commercial lending transactions
Christine HammChristine HammSteve Weise
4
Overview
Lay of the landLay of the land Common opinions in commercial lending
financing transactionsfinancing transactions Entity and contract opinions
Form part of basis for UCC opinions Form part of basis for UCC opinions UCC opinions Real estate financing opinions Real estate financing opinions Securitization opinions
5
Role of customary practicep
Basis for:Basis for: Diligence Meaning of words Meaning of words
ALI Restatement of Law Governing LawyersLawyers
National Customary Practice Statement
6
Sources of opinion letter ‘law’ and customary practice customary practice
ABA reportsABA reports TriBar reports State Bar reports State Bar reports ACREL reports S & P guidelines S & P guidelines Many ABA, TriBar and other reports
available online (for free!):available online (for free!):http://www.abanet.org/buslaw/tribar/home.shtml
7
Entity opinionsp
ExistenceExistence Good standing Not all states Not all states
Authorization No breach of contracts No breach of contracts No litigation statement
9
Contract opinionsp
Sources:Sources: ABA Guidelines ABA Principles ABA Principles TriBar II TriBar Remedies Report TriBar Remedies Report
10
Contract opinionsp
Remedies opinion ‐ scopeRemedies opinion scope Enforceability Does not include UCC opinions such Does not include UCC opinions, such
as attachment of security interest
11
Contracts opinionsp
Exceptions to remedies opinionExceptions to remedies opinion Bankruptcy and equitable principles
Specific exceptions that often come up in Specific exceptions that often come up in lending transactions Prepayment premiums Prepayment premiums Yield maintenance Late charges Late charges
12
UCC opinionsp
SourcesSources TriBar Article 9 Report State Bar reports State Bar reports
Coming TriBar report on secondary sales of securities (UCC Article 8 issues)of securities (UCC Article 8 issues)
13
UCC opinions – attachmentp
Based on contract law opinionsBased on contract law opinions Authority Existence of security agreement as a Existence of security agreement as a
‘contract’ Is collateral and transaction subject to Is collateral and transaction subject to
UCC? UCC scope statement UCC scope statement
14
UCC opinions – attachmentp
Authentication of security agreementAuthentication of security agreement ‘Grant’ language
Assume rights in collateral Assume rights in collateral Transferability of collateral
Assume value? Assume value? Description of collateral Regulated debtors Regulated debtors Due diligence
15
UCC opinions – perfection by filingp p g
Opinion on choice of law?Opinion on choice of law? Diligence on type of entity Assume for debtors that are not Assume for debtors that are not
registered organizations OK to opine on non licensed OK to opine on non‐licensed
jurisdiction if have ‘competence’ on particular issueparticular issue
Due diligence: determining state of f ti t
16
formation, etc.
UCC opinions – perfection by filingp p g
Debtor nameDebtor name Due diligence: organizational
documentsdocuments Collateral description Proper filing and tender of fee Proper filing and tender of fee
17
Perfection by possessionp
Status of agent or bailee as such?Status of agent or bailee as such? Determining actual physical
possession by secured party agent or possession by secured party, agent, or bailee
Due diligence: acknowledgement Due diligence: acknowledgement from bailee
18
Perfection by control
Secured party’s control?Secured party s control? Effect of debtor’s right to given
entitlement orders or instructionsentitlement orders or instructions Due diligence: review of control
agreementagreement
19
UCC opinions – priority ‐ filingp p g
Filing priority?Filing priority? Not common
Review of UCC report Review of UCC report Due diligence: accuracy of search
report?report?
20
UCC opinions – priority: investment property/notesproperty/notes
Control priorityControl priority Possession priority Protected purchaser priority Protected purchaser priority Holder‐in‐due‐course priority Due diligence: Due diligence: Assumptions re notice Assumptions re possession Assumptions re possession,
endorsement and the like
21
UCC remedies
Waivers of debtor rightsWaivers of debtor rights Notice provisions Foreclosure procedures Foreclosure procedures ‘Not manifestly unreasonable’ provisions
22
Real estate opinionsp
Form of deed of trust or mortgage Form of deed of trust or mortgage sufficient
No opinions on title or priority No opinions on title or priority Practical realization exception Sources: Sources: ACREL reports State bar reports State bar reports
23
Securitization opinionsp
Reasoned opinionsp True sale opinion
Transfers of mortgage notes N lid ti i i Non‐consolidation opinion
Use of SPE as single‐asset real estate borrowerborrower
Sources: S & P guidelines Older TriBar report
24
O i i l tt i Opinion letters in commercial lending commercial lending transactions
Christine HammChristine HammSteve Weise
25
Taking Security in an Igloo —Canadian Financing gTransaction Opinion Issues for US Practitioners
Jason Arbuck, PartnerCassels Brock & Blackwell LLPToronto Canada
© 2010 Cassels Brock
Toronto, [email protected]: 416 860 6889
Introduction to Canada
• 9 common law governed provinces• 9 common law governed provinces —similar to the US1 i il d d i Q éb• 1 civil code governed province — Québec
• Québec is different and takes more time —start early
• Property rights are a provincial matter, not p y g p ,federal
© 2010 Cassels Brock 27
Opinion letters
• Structure is similar to US based opinion• Structure is similar to US-based opinion lettersWh t i “ k t” d h t i t “ k t” i• What is “market” and what is not “market” is fairly well established
• Sources for customary practice are “Estey,” the “Green Book” and TOROG
© 2010 Cassels Brock 28
Corporate Opinions
• Corporations can be formed at the• Corporations can be formed at the provincial level or federal levelA l i f d l• Any lawyer can opine on federal corporations
• Provincial corporations require opinion from jurisdiction of formation
© 2010 Cassels Brock 29
Applicable Canadian Legislation
• No uniform code• No uniform code • Common law provinces each have a
“PPSA”“PPSA” • PPSAs are modeled on Article 9 of the
UCC• Many Provinces now have a Securities y
Transfer Act or “STA” which is modeled on Article 8 of the UCC
© 2010 Cassels Brock 30
Creation of a Security Interest —Common Law ProvincesCommon Law Provinces
• Requirements for “creation” are• Requirements for creation are substantially similar to the USUS d ft d it t il• US drafted security agreements are easily “Canadianized”
• Canadianization — consider statute references, judgement currency language, usury laws, annualized rates, no penalties on default
© 2010 Cassels Brock 31
• Governing law — use appropriate province
Creation of a Security Interest —QuébecQuébec
• Typically security in Québec is drafted by• Typically, security in Québec is drafted by Québec counsel“H th ” t b i d b f• “Hypothec” must be signed before registration
• Need to include a dollar amount and full collateral description
© 2010 Cassels Brock 32
Perfection of a Security Interest —Registration SystemsRegistration Systems
• Registration systems in each province• Registration systems in each province • Filing is electronic and instantaneous• Must register in the appropriate provinces
— depends on where the collateral is situated and where the offices of the debtor are situated
© 2010 Cassels Brock 33
Perfection of a Security Interest —Where to RegisterWhere to Register
• Must register and obtain a perfection• Must register and obtain a perfection opinion from local counsel in each province in which a debtorin which a debtor i) has tangible collateral (for tangible collateral),
andand ii) has its “Chief Executive Office” (for intangible
collateral and mobile goods)collateral and mobile goods)• If the debtor has major offices in more than
one jurisdiction then register and obtain
© 2010 Cassels Brock 34
one jurisdiction, then register and obtain opinions from each province
Perfection of a Security Interest —Deposit AccountsDeposit Accounts
• Perfect by registration not control• Perfect by registration, not control• Control agreements not required, but often
d b US l dused by US lenders
© 2010 Cassels Brock 35