This webcast examined how companies increasingly use non traditional financing structures to raise liquidity without incurring conventional on balance sheet debt—and the resulting implications for lenders, credit agreements, and risk assessment.
Companies commonly rely on tools such as sale‑leasebacks, factoring, supply chain finance, and securitizations to improve liquidity, manage working capital, and comply with leverage‑based covenants. While these structures often have legitimate business purposes and favorable accounting treatment, they can create debt‑like obligations that are not fully captured by financial statements or regulated by standard covenant packages. Recent high‑profile bankruptcies have highlighted how these arrangements can obscure a company’s true leverage, facilitate asset leakage from the credit group, and weaken the value of “all‑assets” collateral packages. In many cases, these financings are carved out of definitions of “Indebtedness” and “Total Debt,” excluded from financial covenant calculations, and permitted through broad baskets or expansive defined terms.
The webcast explored how these transactions interact with GAAP, restricted group concepts, asset sale and lien provisions, and mandatory prepayment mechanics. It highlights structural risks for lenders, including structural subordination, reduced collateral quality, uncommitted liquidity sources, and limited visibility into total leverage.
Open to:
- LSTA Members
CLE Credit information:
- 1 NYS CLE credits will be issued (for other jurisdictions, attorneys must apply for CLE credit individually)
- This webcast does not offer CLE credit for replay viewing
Speakers:
- David J. Kennedy, Partner, Finance, Davis Polk
- Jimmy Moustakis, Counsel, Finance, Davis Polk
- Kenneth J. Steinberg, Partner, Finance, Davis Polk
- Tess Virmani, Deputy General Counsel and EVP/Head of Policy, LSTA – Intro