Smith Anderson Advises on Unique $15 Billion Collateral Arrangement to Extend Acquisition Financing

Smith Anderson’s Corporate & Syndicated Finance team recently advised a major financial institution on a bespoke collateral transaction permitting the institution to pledge up to $15 billion in marketable securities as custodied collateral for an existing acquisition financing. Smith Anderson also represented the client in the initial acquisition and financing. 

The transaction was structured to offset expected turnover in the original loan collateral, which otherwise could have triggered partial prepayments prior to final maturity. With the option to pledge replacement collateral as desired, the client not only extends the effective life of its financing, but also can preserve for several years any favorable interest rate treatment. 

To reconcile the parties’ competing policy objectives and operational requirements, Smith Anderson devised a solution that provides the client with flexible, effective control of the securities collateral while providing the lender with exclusive, contractual control. 

The Smith Anderson team—Armand Perry, Lee Kirby and paralegal Linnell Compton—worked closely with the client’s Treasury, Governance and Legal functions on all aspects of this unique transaction.