Corporate: Alternative Investments

Overview

From investment inception to exit strategy, Arent Fox understands the issues that alternative investment participants encounter in this challenging economic environment. We pride ourselves on helping our clients anticipate the future. Our alternative investment team takes a multidisciplinary approach to each engagement and the time to understand the opportunities and challenges that our clients face.

Our attorneys serve not only as counsel but as advisers to our clients. As a relationship-oriented firm, our services extend beyond simply assisting clients with their current legal matters. They include forecasting and identifying future issues. Further, our extensive network of contacts has proven to be beneficial in generating deal opportunities for our clients.

Arent Fox has a broad client base that ranges from multibillion dollar companies to start-ups. We serve as outside general counsel to a variety of middle-market companies and are well-equipped to advise clients on matters involving the organization and structure of new businesses, joint ventures, acquisitions and sales, and reorganizations. Our attorneys provide financial, transactional, corporate, real estate, health, restructuring and litigation legal services in both the United States and abroad.

Private Equity and Hedge Funds

Clients rely on us for ongoing advice regarding the development and execution of investment and exit strategies and the creation of value through acquisitions, divestitures and innovative financing techniques. We focus on the representation of buyout firms targeting middle-market companies, both domestic and international.

Our multidisciplinary team has completed a substantial number of transactions. We efficiently integrate each attorney’s skills, taking into consideration the complexities and challenges of each transaction.
Our strengths include:

• Rapid execution of transactions
• Advising on management compensation
• Counseling on day-to-day management of portfolio companies

Arent Fox understands all phases of an early stage company’s growth curve. We are capable of assisting the CEO and other members of the management team with developing their strategic plan, capital structure and “pitch” suitable for “friends and family,” “angel investors,” strategic investors or the private equity community. We also help management teams develop corporate governance strategies and term sheets and generally help them anticipate the requirements of early stage investors. In this preliminary stage, we work with companies to determine if less dilutive capital formation strategies are available, such as the licensing of ancillary products or intellectual property and the creation of partnerships or joint ventures that will enhance shareholder value without distracting the company’s focus. In general, we believe young companies create and keep more value by undertaking a comprehensive planning process early on.

When a company is ready to begin discussions with early stage investors, our attorneys will assist management in identifying possible sources of capital, taking into account the strategic, geographic and industry focus of many of the funding sources with whom we are familiar. We also advise our early stage clients on how to interpret market feedback and next steps in their capital formation strategy.

Once a group of investors makes a preliminary commitment, we aid the management team in finalizing the term sheet and the more formal documents needed to conclude the transaction. The final investment may take a variety of forms, including common stock, preferred stock, debt with warrants, or licensing arrangements with some other equity enhancements in the form of warrants.

Real Estate Investment Trusts (REITs)

We regularly advise and represent REITs in all aspects of their formation and organization, structuring transactions and raising capital. We have represented both issuers as well as underwriters in capital-raising transactions for REITs. We advise publicly listed REITs with respect to their public reporting requirements with the SEC and the national stock exchanges. We have also represented REITs in joint venture and other strategic investments with capital partners, real estate acquisitions and dispositions; in addition, we negotiate credit transactions, including credit facilities, term loans and mortgage loans.

Our lawyers have also been involved in organizing and structuring best efforts public offerings for non-listed REITs. These representations involved compliance with the SEC’s disclosure requirements and FINRA’s conduct rules as well as addressing state “blue sky” securities compliance. Our lawyers understand the complexities that the multilevel regulatory environment presents to non-listed REITs as well as the due diligence requirements from the independent broker-dealer network involved in selling these investments.

Among the REIT transactions in which our attorneys have served as counsel are:

• Represented the underwriters in a perpetual preferred stock offering for a NASDAQ-listed REIT
• Represented the issuer, one of the oldest REITs in the country, in multiple debt and equity offerings
• Represented a NYSE-listed REIT in various joint venture transactions
• Represented non-listed REITs in their formation and organization

Distressed Debt Funds

We are experienced in all aspects of the purchase and sale of distressed debt and loans whether at par, near par or near liquidation value, including:

• Advising clients in connection with the implementation of effective strategies to influence or control restructurings, reorganizations and bankruptcy proceedings
• Counseling clients in evaluation of potential investments
• Assessing recovery risk
• Due diligence reviews
• Drafting, reviewing and negotiating trade confirms, assignment and participation agreements, swaps and repurchase agreements
• Representing noteholders, creditors committees, acquirers and other major constituents in Chapter 11 cases
• Analyzing bankruptcy proceedings and assessing potential for creditor recoveries

We also help with the purchase and sale of large portfolios of performing, nonperforming and distressed assets, including many offshore transactions in numerous jurisdictions. We regularly assist clients during all phases of large portfolio transactions and provide a full range of services, including analysis of all relevant regulatory issues; drafting and negotiation of bid, sale and transfer documents; and coordination and supervision of local counsel.

Cross-border Private Equity Investment Funds

We advise every type of participant in cross-border private equity investment funds: the funds themselves, the investment manager/adviser, institutional and individual investors, financing entities, indenture trustees, and related agencies. Our lawyers have significant experience in structuring and organizing these funds, maintaining day-to-day operations and providing tax counseling for investors.

Among the investment fund transactions in which our attorneys have served as counsel are:

• A series of international private equity investment funds that invest in electric generation facilities in Latin America (including creation of the funds, identification and solicitation of investors, investment and divestment of fund resources, and daily operation of the funds)
• A multilateral financial institution in the creation and financing of a country-fund in Asia
• A multilateral financial institution in connection with its investment in an international investment fund focused on energy projects in the Caribbean Basin
• A multilateral financial institution in connection with its investment in a cross-border investment fund focused on small and midsized industrial companies
• A US government entity in connection with its investment in an Asian-based financial industries investment fund

An Arent Fox attorney has served for four years on the special task force on private investment funds of the Association of the Bar of the City of New York. He has published numerous articles on cross-border investment funds and has chaired several international conferences on the creation and operation of international private equity investment funds.

Representative Matters

The following matters illustrate the depth of the firm’s alternative investment experience and offer a glimpse of where our attorneys have served as counsel. Representations include:

• A number of private equity funds in their organization, capital formation and investment activities, plus multilateral development institutions in their private equity investment fund investments
• Various large private equity clients in the tax review of equity partnership agreements, modeling out economic and tax consequences of agreement, helping review and model acquisition agreements and structuring acquisitions and dispositions
• A leading middle-market private equity firm in numerous joint venture initiatives with a large automobile group, a federally chartered savings bank, a movie company and a large global asset management business to provide investment products and services to public and private pension funds and other institutional investors in the United States
• A large private equity client in connection with investments and acquisitions of government contractors
• A series of international private equity investment funds that invest in electric generation facilities in Latin America (including creation of the funds, identification and solicitation of investors, investment and divestment of fund resources, and daily operation of the funds)
• A Cayman Island investment fund in its investments in electric power generation facilities in Colombia, Jamaica, Mexico, Brazil, Peru, Guatemala and Honduras
• Various real estate private equity funds in numerous acquisition, disposition and financing transactions throughout the United States
• A leading middle-market private equity firm in the full cycle of matters, including acquisition of a portfolio company and subsequent portfolio company representation and restructuring work, including contracts, IP, employment, litigation and, finally, the sale of the company
• A private equity firm focused on strategic consumer product investments in a joint venture to purchase a retailer that specializes in high-end electronics and other intellectual property
• A leading global alternative asset manager and provider of financial advisory services in an ERISA litigation matter arising from the sale of a group of hotels
• Several large private equity firms in ERISA matters involving the sale or acquisition of businesses and negotiated agreements with the Pension Benefit Guaranty Corporation with respect to pension liability
• A private equity fund with interests in the acquisition of broadcast and media companies
• A private equity company in connection with a contract dispute with a vendor in California state court; also handled an employment termination agreement and a trademark dispute
• Various trading desks in purchase and sale agreements for distressed assets
• A leading private equity firm in the acquisition of long-term care facilities, health care due diligence and the drafting of legal documents
• A leading real estate investment firm focused on strategic investments throughout the Southeast in real estate litigation
• A private equity firm in the creation of a placement agent in addition to contract work with money managers
• A commercial real estate fund in various bankruptcy matters
• Financial wealth advisors through bankruptcy processes and lenders executing a loan-to-own strategies
• Advised a trade association that includes executives from leading private equity firms and represented the organization during its formation as a nonprofit entity
• Various distressed trading funds in bankruptcy proceedings
• Hedge funds in criminal investigation proceedings
• A seller in a transaction with one of the world's leading private investment firms and advised on due diligence tax opinions
• A nonprofit foundation in matters related to a hedge fund litigation against a leading financial management and advisory company
• Served as counsel on transactional matters for a company that raises funds to buy credit card receivables
• The single largest investor in the health care industry on HIPAA and privacy work in relation to a merger
• An infrastructure focused private equity investor in a $1.3 billion port acquisition
• A family of venture capital funds in fund formation and patent portfolio sale
• A fund focused on equipment financing
• A real estate fund investing in distressed real estate
• A real estate fund investing in Section 8 housing throughout the United States
• A private equity fund that invests in gaming opportunities, mostly outside of the United States
• A fund focusing on opportunities throughout the Middle East and Turkey, which involved structuring a Shariah compliant derivative product

Related Practice Areas

Over the years, we have counseled a number of companies across all phases of their growth in numerous industries and geographic areas. We have specific experience in the following areas.

Financial Restructuring

Arent Fox is a leading presence in the bankruptcy and restructuring business, successfully representing clients in both transactional and litigation-oriented matters.

We represent creditors’ committees, indenture trustees, bondholders, lenders and financing syndicates and providers of financing in bankruptcy proceedings in such industries as airline, automotive, manufacturing, health care, hospitality, real estate, and equipment leasing and financing. We frequently represent acquirers of and investors in troubled, distressed and bankrupt companies. Moreover, we often represent debtors as well as counsel boards of directors, management and shareholders. Our partners have significant experience dealing with the Pension Benefit Guaranty Corporation and are recognized as among the leading employment and employee benefits bankruptcy attorneys in the nation.

Health Care

Arent Fox represents private equity funds and other sources of equity to the health care industry as well as lenders to public and private businesses that operate skilled nursing, assisted living, continuing care, retirement and independent living facilities. We represent buyers and sellers of nursing homes, assisted living and independent living facilities as well as a variety of ancillary service businesses in hundreds of transactions throughout the country.

Our lawyers have years of experience in starting, financing and growing early stage, venture-backed health care companies. We also advise clients on the regulatory and transactional legal issues faced by companies during accelerating growth.

Finance

Arent Fox represents seasoned issuers, emerging companies, underwriters and venture capitalists in public offerings and private placements of debt and equity. We also counsel credit providers and borrowers in traditional lines of credit, receivables and other asset-backed financings. We provide counsel and advice for securitized and unsecuritized loans to private equity groups, venture capital investors, commercial finance companies and other financial intermediaries.

Members of the group have worked on over $1 billion in financings involving FHA insurance and the US Department of Housing and Urban Development (HUD). In our capacity as bond counsel or project counsel, we have had extensive negotiations with HUD on such matters as HUD Handbook interpretations and special approval letters required by unique financings including the take‑out financing described below. Some innovative FHA and HUD financings include:

• The first take‑out financing of a bankrupt project using tax‑exempt bonds by the New York State Housing Finance Agency (HFA). In this regard, we prepared a legal and policy memorandum for the board and staff of the state housing agency, which included an analysis of bankruptcy, tax, conflict of interest, real estate and various other related issues. Under a bankruptcy court imposed deadline, we negotiated the bankruptcy plan to best protect the interests of the housing issuer as well as negotiated with HUD and various other state agencies.
• Served as both bond counsel and underwriter’s counsel in the refunding of $178 million New York State Project Finance Agency bonds. The proceeds of the bonds had been used by the New York State Urban Development Corporation to finance residential housing projects for low- and moderate-income families secured by Section 236 payments. HFA had issued an additional $65 million in bonds to rehabilitate these housing projects, which were secured by those same projects but on a subordinated basis. In order to mail a preliminary official statement within a tight two‑week time frame, we successfully coordinated the activities and disclosure materials of five different state housing entities.
• Served as underwriter’s counsel on HDC’s ongoing “open resolution” multifamily housing bond pooled financing program. This program comprises more than $2 billion in loans, making it the largest such program in the country. We devoted a significant amount of effort to disclosing pertinent information on each of the projects and each of the various revenue streams included FHA-insured, Section 236 secured and Section 8 secured projects.
• Served as underwriter’s counsel on one of the largest FHA‑insured pooled financings, requiring separate disclosure on each institution. Because the five nursing homes did not receive the savings from this refinancing, we drafted the disclosure for each of the nursing homes as well as coordinated the financing efforts.

Government Relations/Lobbying

Arent Fox has one of the nation’s leading public policy practice groups, bringing first-hand knowledge, judgment and experience to clients’ government relations needs. We have a bipartisan team of lawyers and policy professionals with experience in Republican and Democratic politics and government service. The group includes two former US senators, a former member of the board of directors of the Export-Import Bank of the United States, as well as attorneys and professionals with extensive and recent experience in senior positions on Capitol Hill, in the executive branch and in the political arena.

Intellectual Property

Arent Fox offers a broad range of services related to the acquisition, enforcement and commercial exploitation of IP rights and assets. With extensive experience prosecuting and defending against infringement claims in state and federal courts throughout the United States, Arent Fox is one of the nation’s pre-eminent IP litigation firms. We have brought and defended numerous lawsuits and proceedings in federal district and appellate courts, the US Supreme Court, the US Patent Office Board of Appeals and Interferences, ADR tribunals and the US Trademark Trial and Appeal Board as well as before the International Trade Commission.

We assist private equity fund clients with investments in a wide range of industries, including life sciences, alternative and renewable energy, technology, health care, real estate, and technology.

Energy and Environmental

Arent Fox provides legal services in the areas of international and domestic energy projects, infrastructure development and privatization and regulatory structures. Our clients include large multinational corporations, international financial institutions, foreign governments and governmental entities. We provide legal services for an array of energy-related transactions and regulatory proceedings and are particularly experienced in liquefied natural gas (LNG) projects and electric power generation and sales. We also provide advice on the emerging legal and regulatory issues associated with green building. One of our attorneys is a LEED Accredited Professional.

Our attorneys have also served as outside counsel to a number of international private equity investment funds focusing on electric power generation. Our work has included structuring and creation of the investment funds, review of tax issues, documentation of equity issues and transfers, negotiation of acquisitions and financing by the funds and creation of exit strategies for fund investors. We represented multilateral financial institutions in their participation in international private equity funds in the energy area.

Antitrust

Arent Fox’s antitrust practice cuts across the entire spectrum of antitrust and competition law. We represent clients in civil and criminal investigations, mergers and acquisitions, and commercial counseling. We have extensive experience handling complex antitrust and distribution-related matters for clients in a broad range of industries, including automotive, oil and gas, biotechnology, chemicals, computers, e-commerce, retailing, consumer products, financial services, media, pharmaceuticals, health care and telecommunications.

Our attorneys offer comprehensive merger and acquisition services. Before a deal is struck, we work closely with our clients to assess the antitrust risk, structure the transaction to minimize risk and advise on antitrust representations, warranties and risk sharing. When an agreement is reached, we prepare HSR filings, coordinate international filings, defend transactions at the Federal Trade Commission and Department of Justice Antitrust Division, respond to second requests and, when necessary, defend transactions in the courts. We have worked extensively with US agencies as well as with European and South American jurisdictions.

ERISA

The experience provided by the Arent Fox ERISA litigation team can be critical in many different respects. With two attorneys who previously held senior positions at the Pension Benefit Guaranty Corporation, the group regularly represents companies involved in buying, selling or restructuring businesses in negotiations with PBGC regarding unfunded pension plan liabilities and, when negotiations fail, in litigation with the federal pension insurer. The ERISA litigation group also counsels and defends companies in all types of ERISA litigation, including claims relating to “withdrawal liability” arising from multiemployer pension plans; “stock drop” litigation involving the investment of retirement plan assets in employer stock; and litigation challenging the legality of new and creative forms of retirement plans, such as “cash balance” plans.

In addition, Arent Fox's transactional ERISA lawyers regularly advise clients on benefit issues related to ERISA and other statutes that regulate Employee Stock Ownership Plans (ESOPs), 401(k) plans, defined benefit pension plans, health and welfare plans (including COBRA and HIPAA), executive deferred compensation programs (Section 409A of the Internal Revenue Code), severance programs, and fringe benefit plans. We design and draft all types of employee benefit plans and advise both for-profit and nonprofit clients on compliance rules. We also develop practical solutions for fixing broken plans, particularly when a client has been sold an “off-the-shelf” program that does not meet its business objectives, and we have been very successful in negotiating practical solutions with the IRS when employers have discovered operational problems with their benefit plans.

Tax

Arent Fox has experience in almost all areas of federal and state tax law and brings practical business judgment and strong advocacy skills in representing taxpayers before the Internal Revenue Service, New York , District of Columbia, Maryland and Virginia tax authorities and all courts having jurisdiction over federal tax disputes. Specialties include: real estate, international transactions (both inbound and outbound), taxable and tax-free acquisitions, and dispositions of corporate assets and stock.