In a structured deal, risk is allocated through contract terms instead of a single loan agreement. Senior investors accept a lower return for being paid first, junior investors take first losses for a higher return, and the documents decide exactly how cash moves between them as conditions change. The same tools fund a specialty lender's loan book, a software company's subscription receivables, or a drug developer's royalty stream. We represent borrowers, sponsors, lenders, and investors in these transactions and in the disputes that arise when performance deteriorates and every party reads the waterfall in its own favor.
Tranching And Credit Enhancement
A structured deal issues several classes of notes or loans against the same pool. Credit enhancement protects the senior classes: subordination of the junior classes, overcollateralization so the pool exceeds the debt, excess spread between asset yield and funding cost, cash reserve accounts, and sometimes third-party guaranties or insurance. Performance triggers tie these together. If delinquencies, defaults, or collateral coverage cross set thresholds, cash that would have gone to junior holders or equity gets redirected to pay down senior debt, or the deal enters early amortization. The definitions behind those triggers, such as what counts as a defaulted receivable and when it is measured, decide who absorbs losses, so we draft them carefully and test them against the client's own data.
Warehouse Facilities
A warehouse line is how most specialty lenders and fintech originators fund assets before they have enough volume for a term securitization or whole-loan sale. The originator sells eligible assets to an SPV, which borrows from a bank or private credit fund against a borrowing base calculated with advance rates, eligibility criteria, and concentration limits. The facility includes reporting covenants, financial covenants on the parent, servicer termination events, and amortization events or defaults that can cut off new funding overnight. We negotiate the eligibility and concentration terms that determine how much the business can actually borrow, the cure rights that keep a technical breach from ending the facility, and a takeout path into a term deal.
Synthetic And Risk Transfer Structures
Not every structure moves the assets. In a synthetic transaction, a bank or other holder keeps the loans on its books and buys credit protection on a reference portfolio through a credit default swap, a financial guaranty, or credit-linked notes whose principal is reduced by losses on the reference pool. Banks use these significant risk transfer deals to reduce regulatory capital charges, and investors use them to get exposure to loan credit without originating loans. The legal questions concern the definitions of credit events and losses, the calculation and verification process, collateral for the protection seller's obligations, and whether the protection satisfies the bank's capital rules. Disputes here tend to center on loss determinations.
Revenue-Based And Royalty Financing
Revenue-based financing gives a company cash in exchange for a percentage of future revenue until a fixed multiple is repaid. Royalty financing buys all or part of a royalty stream, common with pharmaceutical and medical device licenses and music rights. Both can be drafted as a purchase or as a loan, and the label is not decisive. Courts look at whether the investor's return is truly at risk, whether there is a fixed repayment term, and what recourse exists if revenue falls. If the deal is recharacterized as a loan, usury limits, lender licensing, and state commercial financing disclosure laws may apply, and a royalty sale can end up treated as a secured loan in the seller's bankruptcy. We draft these deals so the economics and the characterization match.
Waterfall And Trigger Disputes
Structured finance litigation is usually a contract interpretation fight with large numbers attached. Junior and senior holders disagree about whether a trigger has tripped, how a defined term applies to a class of assets, or whether an amendment needed unanimous consent. Trustees often seek instructions from a court rather than risk liability to either side. We represent noteholders, sponsors, servicers, and borrowers in these disputes and in claims against servicers and collateral managers for breach of the servicing standard. The best protection is drafting. Ambiguous definitions, inconsistent calculation dates, and amendment provisions that do not say which holders must consent cause many of these disputes, and each can be fixed at signing.
