• Independent Directors For Bankruptcy Remote Entities
Independent Directors are often required by institutional lenders and rating agencies for financings of assets, because Independent Directors provide protection to the lenders. The Independent Director provides the lender an assurance of "independence" on a bankruptcy vote. No bankruptcy action can be declared without the approval of the Independent Director, who by definition is not related to or controlled by the borrower.
| Borrowers can lower funding costs by using a special purpose entity (SPE) for financing commercial real estate or securitization of assets. The use of a SPE permits lender's pricing to be determined by the asset(s) and the related cash flows of the SPE, thereby reducing the borrower's cost. The lender also derives a benefit: the ability to sell the loan into the secondary market. |
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SMC provides professionals available to serve as Independent Directors/Managers/Members for bankruptcy remote SPEs. Our cost conscious fees are determined by the specific duties of the individual(s), the number of SPEs, and appropriate indemnification for the individual(s) appointed. Our professional experience allows us to analyze the risk involved and price accordingly. The experience of our directors is reflected in our Professionals Profile.
Most of our competition now requires Directors and Officers (D&O) coverage for all transactions, which adds to the cost and complexity. SMC is prepared to provide, at a reasonable price, bankruptcy remote services without a D&O insurance requirement. The duties, however, must be appropriately restricted to the bankruptcy actions.
By eliminating the D&O insurance requirement, we have streamlined our approach to closings. To determine our duties, all we need to review is the SPE's operating agreements or bylaws and articles of incorporation. The only signed document we require from a client is our Indemnity and Fee Agreement.
