Publications

When a valued borrower asks its lender to finance goods covered by sea waybills, the answer doesn’t have to be a flat no. By expressly addressing known issues within the loan documentation, the lender can mitigate many of the risks.

In Part II of his Banking Law Journal series, Partner Peter Lahny sets out a practical framework for secured creditors that choose to extend this accommodation, including:

• Revising the Eligible Inventory definition to require that the sea waybill names the borrower as consignee, the goods are headed to a jurisdiction where the lender maintains a perfected security interest, and the goods arrive in such jurisdiction within 20 days of shipment
• Capping the dollar amount of Eligible Inventory consisting of sea waybill-covered, in-transit inventory at any time included in the borrowing base
• Making advances in the amount of the purchase price directly to the supplier, backed by the supplier’s invoice, copies of the sea waybills, the borrower’s sales contract and a customer invoice
• Executing a tri-party Master Sea Waybill Agreement among lender, borrower, and supplier, under which the paid supplier expressly gives up any right to divert the goods or instruct the carrier

To view a copy of The Banking Law Journal, please click below.