What is a Colsolidation Practice? A Case Study.
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Transcript of What is a Colsolidation Practice? A Case Study.
What is a Consolidation Practice?
A Case Study
Presented by Bart Greenberg
Manatt, Phelps & Phillips, LLP
For the Inland Empire Business Forum
What is a Consolidation Practice?
� It is Much More that Numerous, Repeated Acquisitions
� It is a Holistic and Integrative Approach to each of the
Following:
� Acquisitions
� Financings
� Real Estate Leases
� Other Material Contracts
�The Following Case Study Is Illustrative of this Point:
In the Beginning . . .
X
Holding Company
What Happened Next?
� 35 Acquisitions
� 18 Stock Purchases
� 17 Asset Purchases
�Financings
� Seller Financing� Secured
� Unsecured
� Preferred Stock Financings
� Mezzanine Debt Facilities
� Vendor Assisted Financing� Secured
� Unsecured
The Resulting Corporate Structure
D E F G
1 2 3 4
5 6 7 8
9
H I J K
X A B C
AA BB
CC DD
EE FF
GG HH
II JJ
KK LL
Y
Holding Company
The First Restructure
�Goals:
� Correct Corporate Structure
� Certain Subsidiaries at Wrong Level
� Simplify Overall Corporate Structure
� Confusion from Operational Perspective
� Confusion from Investor Perspective
� Reduce Costs Associated with Structure
� Legal Cost of Separate Entities
� Liability Risk of Many Entities
� Not Chase Any Third Party Consents
After First Reorganization
D E F G
1
H
X
AA BB
CC DD
EE FF
GG HH
II
Y
Holding Company
What Happened Next?
� 6 Acquisitions
� 1 Stock Purchase
� 5 Asset Purchases
�Financings
� Seller Financing
� Unsecured
� Preferred Stock Financing
� Vendor Assisted Financing
The Resulting Corporate Structure
D E F G
1
H I
X
AA BB
CC DD
EE FF
GG HH
II
Y
Holding Company
The Second Restructure
�Goals:
� Two of the Same as the First Restructure
� Simplify Overall Corporate Structure
� Reduce Costs Associated with Structure
� Prepare for Anticipated Credit Facility
� Not Chase Any Third Party Consents
The Resulting Corporate Structure
D E F
1
H I
X
AA BB CC
Y
Holding Company
The Anticipated Credit Facility
�New Lender Requested Company to Transfer Secured Assets
of Company “Y” (constituting 10 facilities) to Newco
� Legal Issues to Effect Drop-Down of Assets:
� Only One Landlord Consent
� Notice Only to Four Other Landlords
� “Notice” to one Secured Creditor
The Resulting Corporate Structure
D E F
1
H I
X
AA BB CC
Newco
Y
Holding Company
The Credit Facility
�No Consents Required
Lessons to Be Learned
Planning, Planning and Planning
�Some Key Considerations:
� Broad Prospective Consent of Creditors to Subordination
� Relaxation of Typical Negative Covenants on the Following:
� Mergers and Restructurings
� Investments in Subsidiaries
� Certain Transfers of Collateral
� Broad Flexibility to Conduct Transactions with Affiliated
Persons
� In Sum, LEGAL Planning for All Anticipated Possibilities of
Growth
Thank you!