Finance & Derivatives

Litigation finance is a growing investment class with attractive returns. This form of capital has joined the mainstream as an appealing alternative investment tool with risk and return profiles distinct from conventional or broader market investing.

As the preeminent law firm in the investment management space, Schulte represents some of the biggest names in the financial and investment management industries. We serve as counsel to both investors and lenders, including hedge and private equity funds, that are involved in sophisticated financing arrangements, including litigation financing.

> Learn more about Schulte’s Litigation Finance practice

Schulte has a market-leading structured finance and derivatives practice. Our extensive practice covers both transactional and regulatory work.

“Strong structured finance practice with a broad range of capabilities across the transactional and regulatory space. Represents an array of major players in the market, including managers, issuers, placement agents and investors.” — Chambers USA

We represent investment funds (both registered investment companies and private investment partnerships), corporations, collateral managers, institutional purchasers, pension plans, banks (including institutions based outside of the United States) and structured finance vehicles. Our team is active in structuring over-the-counter derivatives products, including credit-based derivatives, fund-linked derivatives, commodity-based derivatives, equity derivatives, debt derivatives, interest rate derivatives, foreign exchange derivatives, currency derivatives, weather derivatives, total return swaps and forward and option agreements. The Group also negotiates ISDA master agreements, repurchase agreements, securities lending agreements, prime brokerage agreements, custody agreements, clearing agreements and master netting agreements.

Recognizing the close relationship between structured transactions and derivatives from an economic, business and documentation standpoint, Schulte long ago integrated our structured finance and derivatives practices. This has, among other things, allowed us to develop legal services around new products like “synthetic” collateralized loan obligations. We work closely with investment and commercial banks in structuring transactions that are dependent on the proper treatment of instruments under banks’ regulatory capital guidelines. We have also been retained for a variety of unusual and specialized derivatives projects, including acquisitions of derivatives dealers and futures commission merchants, documenting credit derivatives product companies, coordinating transfers of derivatives transactions resulting from changes in corporate structure and advising the liquidators of insolvent funds and other structured vehicles, such as SIVs.

In addition, Schulte has long appreciated the trend toward the integration of structured finance, derivatives and hedge funds, as evidenced by the growing number of hedge funds that use complex derivatives and structured finance products. Accordingly, we are organized to serve our clients’ needs in these areas seamlessly — and to address the constantly evolving roster of players, asset classes and business goals. For example, we work closely with hedge fund clients in structuring derivatives to achieve the most efficient tax treatment and to mitigate against risks such as counterparty exposure, early termination and valuation conflicts.

We represent investors, lenders, hedge funds, private equity funds and finance companies in all areas of securitization and asset-backed lending, including securitization, senior secured and subordinated loans, revolving credit, warehouse facilities and commercial paper conduits. Our practice has a particular focus on the securitization and financing of “off-the-run” and esoteric assets, including many types of receivables: structured settlements, timeshare loans, royalties, insurance-linked securities, lottery receivables, equipment leases, life settlements, merchant cash advances and litigation-related funding.

We assist clients with products involving the securitization of high-yield loans and bonds and corporate debt. We also handle private asset-backed securitizations, warehouse facilities and secured financings encompassing a wide range of assets, including life settlements, alternative risk transfer and marketplace lending, equipment leases, structured settlements, lottery receivables, timeshare loans, litigation advances, merchant cash advances and cell towers, in addition to other esoteric asset classes such as intellectual property.

“Noted for its successful CLO practice, regularly representing collateral managers, as well as its work on private equity fund formations and ABS transactions.” — Chambers USA

We have acted as deal counsel for many collateralized loan obligations (CLOs), as well as collateralized bond obligations (CBOs). These transactions have involved the securitization of high-yield loans and bonds, investment-grade corporate debt, credit default swaps and interests in hedge funds. Our practice has long included synthetic offerings which use derivatives to reference pools of loans, bonds and other risk assets.

Schulte has extensive experience in representing large private equity funds, credit funds, hedge funds and funds of funds in subscription/capital call facilities, warehouse credit facilities, NAV facilities and related types of specially designed lending facilities structured to facilitate the acquisition of portfolio assets, make time-sensitive investments or redeem interests. Schulte’s financial-industry focus gives us the breadth of perspective necessary to quickly and effectively handle these transactions.

Our finance lawyers have extensive experience with sophisticated and complex transactions and advisory matters including leveraged financings (of a committed or “best efforts” basis) for acquisitions, refinancings, recapitalizations and going-private deals, ranging from first-lien and second-lien debt financings, asset-based and reserved-based lendings, bridge loan financings and high-yield debt offerings. As one of the leading law firms in the financial services industry, our clients include leading investment banking firms and commercial banks, underwriters, placement agents and initial purchasers. We also represent broker-dealers on dealer-manager and consent solicitation agent engagements, and have represented issuers and broker-dealers in tender and exchange offer transactions. With outstanding business acumen and market knowledge, our lawyers serve as valued partners to our clients in this complex, fast-paced area of finance.

We work with our Investment Management Group to advise sponsors of securitizations (including collateral managers of CLOs) on how to establish new entities to hold interests in securitizations in compliance with the risk-retention regulations adopted by the U.S. and EU regulators. These transactions have included “originators” formed to sell assets to securitization vehicles and to hold risk retention interests in compliance with EU regulations, as well as sponsors, capitalized management vehicles and “majority-owned affiliates” formed to employ third-party capital in order to hold risk retention interests in compliance with U.S. regulations (and in many cases in compliance with both EU and U.S. regulations). We also advise investors which provide capital to these new risk-retention vehicles.

Schulte represents a broad range of traditional lenders, including banks, commercial finance institutions, and non-traditional lenders, such as private investment funds, in the structuring, negotiation and documentation of asset-based credit facilities. These financings typically involve lending on accounts receivable, inventory, equipment and other business assets. We have vast experience counseling asset-based lenders in large, syndicated transactions as well as in single-lender and “club” deals, with such transactions encompassing a diverse array of products and services, both domestic and international.

Schulte regularly counsels many of the country’s largest and most established lenders in the origination and acquisition of “B” loans and other “last-out” debt financings. These labels often refer to loans that (1) are secured by liens junior in priority to those securing a senior asset-based credit facility; or (2) share the same lien securing the “A” or senior loans, but the proceeds of collateral subject to such lien are applied first to repay the “A,” or “first-out,” loans and second to repay the “B,” or “last-out,” loans. Given the high level of risk attendant to “B” loans, our lawyers work closely with clients to structure and document such loan financings to maximize the inherent value of the collateral pool supporting the loan and to negotiate the terms of the intercreditor relationship between the “A” and “B” lenders.

Schulte regularly provides advice on structuring and closing mezzanine and other subordinated debt financings. These transactions have included mezzanine tranches or separate mezzanine facilities for single projects as well as large multi-state portfolios, “B” notes or similar junior participations in securitized loans and other senior-subordinated debt transactions. Our lawyers are very familiar with the issues presented to mezzanine lenders, rating agencies and senior lenders in these financings and are actively involved in suggesting creative solutions to typically complicated negotiations.

Schulte is well-known for representing clients in distressed situations. Our lawyers lead the negotiation and structuring of pre-petition debtor-in-possession financings and confirmation facilities as well as the workout and restructuring of existing facilities, working closely with Schulte’s Business Reorganization Group on petitions, pleadings and other motions before the bankruptcy court. This strategic blending of practice areas efficiently brings clients the detailed knowledge necessary to navigate the risks associated with lending to debtors in bankruptcy.

Our lawyers represent the firm’s private equity clients and their portfolio companies in obtaining, as well as underwriters and arrangers in placing, financing in the high-yield debt markets. We have completed transactions involving secured and unsecured senior and senior-subordinated notes, both in connection with the original financing of acquisitions and in subsequent refinancings and recapitalizations. In these multifaceted representations, our lawyers negotiate the terms of the securities and underlying collateral and intercreditor arrangements while working closely with lawyers in the M&A and Securities Group on the offerings.