September 29, 2020

Volume X, Number 273

September 29, 2020

Subscribe to Latest Legal News and Analysis

September 28, 2020

Subscribe to Latest Legal News and Analysis

New European Legislation Creating Headaches (and Opportunities) for Borrowers

New legislation gives European regulators the power to write-down, change the terms of, cancel, and convert into equity the liabilities (including loan commitments) of troubled European lenders.

New credit agreements typically require the borrower to consent in advance to the exercise of these sweeping powers by the regulator. What does this mean to a borrower?

  • Loan commitments of European lenders could be reduced or eliminated

  • Undrawn commitments of such lenders can be converted to equity, so a borrower would own an equity interest in, instead of having a debt commitment from, the troubled European lenders

  • An event of default could be triggered, if owning equity interests in a European lender is not a permitted investment

  • European regulators can make other unilateral modifications to borrowers’ credit facilities

What should the borrower do to protect itself? Be sure your credit agreement allows the company to remove or replace troubled European lenders. This language can be added to the “yank a bank” clause. If your credit agreement limits investments, be sure to allow this equity interest.

© 2020 Foley & Lardner LLPNational Law Review, Volume VI, Number 173


About this Author

Kevin J. Malaney, Foley Lardner, Patent Resolution Attorney, Trade Secret Matters Lawyer,

Kevin J. Malaney is senior counsel and an intellectual property lawyer with Foley & Lardner LLP where his practice involves the resolution of patent, trade secret, and other intellectual property disputes. Mr. Malaney is a member of the firm’s Intellectual Property Litigation Practice.

His case experience spans many diverse technologies with a primary focus on computer software and hardware disputes. Exemplary technologies include process control systems, VoIP, 802.11, biometric encryption and decryption, and media content delivery...

Jeremy Polk, Foley Lardner Law Firm, Business Lawyer

Jeremy Polk is a partner and business lawyer with Foley & Lardner LLP. He represents public and private borrowers, issuers, and other parties in a broad range of finance transactions. Mr. Polk is a member of the firm’s Finance & Financial Institutions Practice.

Representative Experience

  • secured and unsecured, senior and subordinated, investment grade and below investment grade, revolving and term, syndicated, participated and bilateral, domestic, international and multicurrency credit agreements, and facilities and indentures; and

  • securitization and other structured finance transactions relating to various types of assets and loan participations, including securitizations of credit card receivables, mortgage loans, and equipment dealer receivables, equipment lease financings, real property tenant-in-common transactions, and mortgage loan repurchase facilities.

Mr. Polk also has experience in connection with the drafting, negotiation, and delivery of true sale / non-consolidation and true lease legal opinions in securitization and structured finance transactions and other financial asset sale transactions in the secondary market. Such opinions include true sale / non-consolidation opinions relating to the securitization of the types of assets described above, true sale opinions with respect to participation interests in loans, and true sale opinions with respect to mortgage loans sold under the Fannie Mae DUS and single family programs and the Federal Home Loan Banks' mortgage purchase programs; true sale / non-consolidation opinions with respect to the securitization of health care receivables; true lease opinions in connection with mortgage loan securitization transactions; and non-consolidation opinions in connection with real estate tenant-in-common transactions.

Christine Rittberg, Foley Lardner Law Firm, Business Attorney
Senior Counsel

Christine (Chrissy) Rittberg is a senior counsel and business lawyer with Foley & Lardner LLP and is a member of the Finance & Financial Institutions and Transactional & Securities Practices and the Health Care Industry Team.


Ms. Rittberg earned her law degree from the University of Minnesota Law School (J.D., magna cum laude, 2008), where she was elected to the Order of the Coif. While in law school, she was a managing editor of the Minnesota Law Review. She earned...