Cross-Border Financing Transactions

Summary

This practice note describes the issues and risks that must be addressed in structuring a financing transaction for a non-U.S. borrower (a foreign borrower). In most cases, foreign borrowers that are parties to a credit agreement are subsidiaries of a U.S. parent company that is also a borrower under the credit agreement. Companies may prefer to have loans made directly to the foreign borrower, rather than borrow funds at the parent level and make an intercompany transfer, for various tax, accounting, or operational reasons. Lenders may also prefer to lend directly to a foreign subsidiary in order to gain recourse to that subsidiary that would otherwise not be available.