- A transfer of control of a borrower or its business to non-U.S. lenders who exercise remedies under financing documents could trigger CFIUS issues
- CFIUS regulations adopted in February 2020 dramatically heighten the risk to non-U.S. lenders and borrowers by sweeping many more businesses and industries within CFIUS’ regulatory reach.
- Advance planning can limit the need for CFIUS reviews for parties entering into new financings and provides a safety valve for parties to existing financings, whether in distressed, workout or bankruptcy scenarios.
The COVID-19 pandemic has had a drastic and abrupt impact on global commerce, as many businesses have slowed or suspended operations. Despite aggressive U.S. Government efforts to support vulnerable businesses, the sharp economic downtown is compelling lenders and investors to consider restructuring and/or exercising remedies under their financing documents in order to protect their interests. In so doing non-U.S. lenders and investors potentially face an additional hurdle that may not have been accounted for at the time of the original transaction. The Committee on Foreign Investment in the United States (CFIUS) may have jurisdiction to review and potentially disallow certain default remedies, financial restructurings, and equity conversion rights where foreign persons are involved.