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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 . . .



Holding Company


          X
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
                      Holding Company


                               A       B   C
                       X                            Y


          D       E        F       G           AA       BB

          H       I        J       K           CC       DD

                                               EE       FF
1     2       3   4
                                               GG       HH
5     6       7   8
                                               II       JJ
9
                                               KK       LL
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
           Holding Company


            X                     Y


D      E    F   G     H      AA       BB

                             CC       DD
                      1
                             EE       FF

                             GG       HH

                             II
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
            Holding Company


            X                          Y


D   E   F       G   H         I   AA       BB

                                  CC       DD
                     1
                                  EE       FF

                                  GG       HH

                                  II
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

                 Holding Company


             X                      Y


D      E     F      H     I    AA   BB   CC


                     1
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
           Holding Company


           X                            Y


D    E     F       H         I        Newco


                    1            AA    BB     CC
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!

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What is a Colsolidation Practice? A Case Study.

  • 1. What is a Consolidation Practice? A Case Study Presented by Bart Greenberg Manatt, Phelps & Phillips, LLP For the Inland Empire Business Forum
  • 2. 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:
  • 3. In the Beginning . . . Holding Company X
  • 4. 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
  • 5. The Resulting Corporate Structure Holding Company A B C X Y D E F G AA BB H I J K CC DD EE FF 1 2 3 4 GG HH 5 6 7 8 II JJ 9 KK LL
  • 6. 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
  • 7. After First Reorganization Holding Company X Y D E F G H AA BB CC DD 1 EE FF GG HH II
  • 8. What Happened Next? 6 Acquisitions 1 Stock Purchase 5 Asset Purchases Financings Seller Financing Unsecured Preferred Stock Financing Vendor Assisted Financing
  • 9. The Resulting Corporate Structure Holding Company X Y D E F G H I AA BB CC DD 1 EE FF GG HH II
  • 10. 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
  • 11. The Resulting Corporate Structure Holding Company X Y D E F H I AA BB CC 1
  • 12. 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
  • 13. The Resulting Corporate Structure Holding Company X Y D E F H I Newco 1 AA BB CC
  • 14. The Credit Facility No Consents Required
  • 15. Lessons to Be Learned
  • 16. 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