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January 22, 2018

How Letters of Credit Can Stall Mergers

Philadelphia partners Jill Bronson and Eirik Tellefsen authored an article for CFO titled “How Letters of Credit Can Stall Mergers.” The article reminds parties to mergers and acquisitions that a company’s letters of credit (LCs) should not be overlooked, since they can stall a purchase agreement that is near closing.

To combat potential problems incurred by LCs, Jill and Eirik recommend four ways buyers and sellers can deal with them. The examples they highlight include working with the beneficiary, providing a back-to-back LC, depositing cash with the target’s bank on the closing date, and working with the target’s bank and the buyer’s bank to bring the target’s LCs into the buyer’s credit facility.

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