Continued from page 19 possess the asset and have no obligation to pay junior creditors , if there are any . It is important to understand the priority of the loan that the SPV makes . Reviewing intercreditor agreements or otherwise understanding the intercreditor relationship and priority of payments and security will help an investor understand the risk they are taking in a deal . Take a careful look at the amount of equity in a deal that comes behind the lending obligations . If there is plenty of collateral value in an asset or equity in a structure to support all of the debt , then even the junior debt may be reasonably safe .
Default & Remedies : Ideally , there are clear provisions on what constitutes a default and what remedies are available to the lender in the event of a default . Some loans may have default interest provisions that escalate the rate of interest charged on the loan . Most loans will allow for some sort of acceleration of the loan such that the entire loan is due immediately . Note , however , that if a loan is accelerated and the borrower is left without funds to carry on its business and create sufficient jobs prior to final approval of all EB-5 visa applicants , it would likely jeopardize the immigration prospects of the EB-5 investors .
Guaranty : Is there a guarantor to the loan who will carry out the borrower ’ s payment obligations if the borrower defaults ? Who is the guarantor ? What exactly are they guaranteeing , and how financially sound is the guarantor ? Whether a guaranty is meaningful in a loan requires a similar analysis as required to determine whether collateral is meaningful in a loan . Many EB-5
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Boilerplate : Boilerplate language is in agreements not to waste time or paper , but because it has legal significance . For example , if the boilerplate allows for assignment of loans , that may create an EB-5 issue . As with the rest of the loan documentation , it is best to read through the boilerplate provisions . If there is an assignment , confirm that the new party is obligated to maintain the EB-5 investment and restrictions for as long as needed to achieve the EB-5 purposes .
Affiliated Parties : Note that no matter how good the agreement , if all the parties are affiliated and there is no third party control mechanism , they can always waive or amend the agreements liberally . That means that even if there is a robust agreement in place , the parties could change it later to something less protective . There are strategies to better control situations where the parties are all affiliates , but case-by-case analysis is required . Remember also , that just because the parties are affiliated does not necessarily mean that a deal is bad . With trusted and sophisticated parties , it may actually be convenient for them to be able to adapt swiftly to situations that may arise .
This article is not meant to be comprehensive ; entire treatises are written about loan agreements or even specific concepts within loan agreements . Ideally , this article gives the reader an insight into some of the provisions commonly found in loan agreements and how they might affect an investment analysis as it pertains to EB-5 . The general logic is that a more comprehensive loan with the full range of bells and whistles may make for a safer and better loan ; however , it is important to understand that a loan having all of the elements that would seem to make it a stronger and safer loan from a legal perspective does not unilaterally mean that it is actually the stronger or safer loan . Some of the safest loans in life can come from simple agreements or even oral agreements with trusted , honorable folks .
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Jor Law practices corporate and business transactional law and is a founding shareholder of Homeier & Law , P . C . Jor received his J . D . from Columbia University and his B . A . from UC Berkeley . Jor is a member of the California and New York state bars . For three consecutive years , in 2009 , 2010 and 2011 , Jor was recognized by Los Angeles magazine as one of “ Southern California ’ s Super Lawyers – Rising Stars ,” placing him among the top 2.5 percent of the best up-and-coming attorneys in Southern California who are 40 years old or younger , or who have been practicing for 10 years or less .
Angelique Brunner is the President of EB5 Capital and owns or operates regional centers in Washington , D . C ., and California . Angelique sources and structures projects for her firm and will soon launch her 8th project . She has maintained a 100 % approval rate for her investors ’ I-526 and I-829 petitions . She brings over 15 years experience in finance to the industry . Additionally , Angelique has served on the Best Practices Committee and Public Policy Committee of IIUSA .
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