Last month, we reported how a key component of project finance—syndicated term loans—was the subject of a crucial case being heard in the U.S. Court of Appeals for the Second Circuit. In Kirschner v. JP Morgan Chase, the plaintiff contended that the term loans at issue were in fact securities that should be regulated under state and federal securities laws. Interestingly, the Securities and Exchange Commission declined to submit an amicus brief, despite the Court’s invitation to do so.
On August 24, 2023, the
Second Circuit issued its opinion affirming the district court’s conclusion that the term loans at the center of the dispute could not be considered securities under the four-part
Reves test applied by the district court.
This outcome avoids what would have otherwise been a huge upheaval of long-settled practice in the syndicated term loan market and would have severely impacted any project borrower or lender issuing or holding a term loan in a syndicated facility.
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