ARTICLE
20 March 2023

Potential Responses To Liquidity Crunch In The Wake Of Regional Banking Crisis

FL
Foley & Lardner

Contributor

Foley & Lardner LLP looks beyond the law to focus on the constantly evolving demands facing our clients and their industries. With over 1,100 lawyers in 24 offices across the United States, Mexico, Europe and Asia, Foley approaches client service by first understanding our clients’ priorities, objectives and challenges. We work hard to understand our clients’ issues and forge long-term relationships with them to help achieve successful outcomes and solve their legal issues through practical business advice and cutting-edge legal insight. Our clients view us as trusted business advisors because we understand that great legal service is only valuable if it is relevant, practical and beneficial to their businesses.
The Secretary of the Treasury, the Federal Reserve Board, and the Federal Deposit Insurance Corporation (FDIC) chairs have issued a joint statement to give comfort to the markets...
United States Finance and Banking

The Secretary of the Treasury, the Federal Reserve Board, and the Federal Deposit Insurance Corporation (FDIC) chairs have issued a joint statement to give comfort to the markets that they have approved actions designed to enable the FDIC to complete its resolution of Silicon Valley Bank (SVB) and Signature Bank of New York in a manner that fully protects depositors and makes available additional funding to eligible depository institutions to help banks maintain liquidity for all depositors. Nonetheless, we are not yet out of the woods.

Over the course of the last few days, we have worked with our clients to:

  • Open alternative banking facilities and comply with “know your customer” and other regulations, corporate approvals, and the like
  • Interpret the status of existing facilities at SVB and other banks and their recoverability under applicable legislation prior to the joint statement from U.S. government regulators
  • Comply with existing loan and security agreements with lenders who are FDIC-insured banks
  • Comply with federal, state, and local labor and employment laws
  • Navigate issues under commercial agreements with suppliers, vendors, and customers
  • Inform customers and payors of new banking facilities where to make payment to avoid payment delays if made to a closed institution
  • Brainstorm potential solutions for temporary liquidity crunches by creating new payroll facilities on credit and preparing bridge loans

We worked with many of our clients to create short forms of unsecured promissory notes, subordination agreements, and related corporate approvals to raise capital from existing investors and new lenders to finance urgent payroll and other matters.

Given the announcement by U.S. government regulators, this situation is evolving rapidly, but we are standing by to jump into the void with our clients and address liquidity requirements in a very practical and commercial fashion.

Depending on the resolution of banks taken over by the FDIC, we expect that existing loan and security agreements, term loans, revolving loans, credit lines, and even credit cards and bank machine cards will need to be refinanced or replaced and alternative sources of credit sourced.

Many of our clients will consider treasury, cash, and risk management policies and strategies in light of their recent experiences.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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