Legal Opinions for Loan Transactions Toolkit
This Toolkit includes resources to help counsel understand the purpose and importance of legal opinions in loan transactions and to draft and negotiate the main provisions of these opinions.
The delivery of a legal opinion by the borrower's counsel is typically a condition precedent to the closing of all significant loan transactions. Depending on the transaction, a legal opinion letter may be delivered by:
The borrower's in-house counsel.
The borrower's outside counsel.
Local counsel (if the transaction involves or implicates cross-border issues or local state laws).
Specialist counsel (for example, real estate, litigation or intellectual property counsel).
However, drafting and negotiating these opinions can be one of the most difficult and challenging aspects of closing a loan transaction (see Closing a Loan Transaction ( www.practicallaw.com/7-381-7463) and Closing a Loan Transaction Checklist ( www.practicallaw.com/9-381-9418) ). The opinion giver must:
Consider the legal issues presented by the transaction, including the laws that apply to the transaction and the borrower's obligations under the loan documents.
Assess each opinion being requested and determine whether it is appropriate under the circumstances.
Consider the scope of the investigation and inquiry he must undertake to deliver each opinion being granted.
Determine what, if any, assumptions and qualifications he must include with respect to each opinion to be given.
In making a decision as to each of the issues set out above, the opinion giver must:
Balance the expectations of the opinion recipients and the needs of his client with customary opinion practice and the preferences and practices of the opinion giver's firm or legal department.
Be mindful of potential liability issues and the financial and reputational risks the opinion poses to the opinion giver and the opinion giver's firm or legal department.
Analyze how a court might interpret not only the documents covered by the opinion, but the opinion itself in the event of a dispute.
This Toolkit contains a number of continuously maintained resources to help counsel draft and negotiate legal opinions delivered in connection with a loan transaction.