March 15, 2017
Latham & Watkins LLP is pleased to launch the Latham OID Threshold Calculator™, an innovative app that enables leveraged finance bankers to quickly calculate whether incremental debt can trade with outstanding debt on a tax-fungible basis under the standard de minimis test. The calculator is available as a free download on the iTunes App Store and Google Play. The app can be used on iPhone, iPod and iPad, as well as Android devices.
The app calculates the standard de minimis OID threshold for a loan or note with customary terms that pays regular cash interest and has fixed (or no) amortization on a quarterly basis. An incremental loan or tack-on note that is issued with less than de minimis OID and with the same terms as the existing debt is generally considered tax fungible with the outstanding debt.
An interdisciplinary team of banking and tax lawyers with extensive experience advising leveraged finance professionals on the execution of tack-on debt offerings led the development of the app.
“The use of incremental financing has grown substantially over the last several years given market volatility and the development of more flexible documentation for tack-on loans,” said Dan Seale, global Co-chair of the Latham & Watkins Banking Practice. “The calculator will bring enormous value to bankers as it addresses one of the fundamental questions they need to answer before structuring incremental debt with customary terms.”
“Innovation is central to the culture at Latham, and we are always looking for creative ways to proactively address clients’ pressing needs,” said Jiyeon Lee-Lim, global Chair of the Latham & Watkins Tax Department. “We are excited to add the tool to the firm’s suite of apps and products designed for the finance and business communities.”
Jesse Sheff, partner in Latham’s Banking Practice and one of the project team leads, added: “There has been an uptick in bolt-on and tuck-in acquisitions for leveraged borrowers over the last several years as price multiples for new buyouts remain at high levels and borrowers look to finance these accretive transactions efficiently and seamlessly within their existing capital structure. The calculator will be a key tool for bankers executing these transactions daily as it answers the threshold structuring question on demand.”
A higher OID than calculated under this app may be permissible in certain situations. For more information on the Internal Revenue Service (IRS)’s final regulations that facilitate issuing fungible tack-on debt instruments, please see Latham’s Client Alert and Tax Fungibility In Tack-On Offerings Flow Chart.
The Latham OID Threshold Calculator™ is the latest addition to the firm’s suite of apps and products designed for the finance and business communities, including the Book of Jargon® – US Corporate and Bank Finance and Book of Jargon® – European Capital Markets and Bank Finance, which provide a comprehensive online A-Z library covering corporate and bank finance slang and terminology.
About Latham & Watkins
Latham & Watkins is a global law firm with more than 2,200 lawyers in its offices located in Asia, Europe, the Middle East and the United States, including: Barcelona, Beijing, Boston, Brussels, Century City, Chicago, Dubai, Düsseldorf, Frankfurt, Hamburg, Hong Kong, Houston, London, Los Angeles, Madrid, Milan, Moscow, Munich, New York, Orange County, Paris, Riyadh, Rome, San Diego, San Francisco, Seoul, Shanghai, Silicon Valley, Singapore, Tokyo and Washington, D.C. For more information on Latham & Watkins, please visit the website at www.lw.com.
Notes to Editors
Latham & Watkins operates as a limited liability partnership worldwide with affiliated limited liability partnerships conducting the practice in the United Kingdom, France and Italy and affiliated partnerships conducting the practice in Hong Kong, Japan and Singapore. Latham & Watkins operates in Seoul as a Foreign Legal Consultant Office. Latham & Watkins practices in Saudi Arabia in association with the Law Office of Salman M. Al-Sudairi.
Daniel Seale, Banking Practice Global Co-Chair, +1.212.906.1341
Jiyeon Lee-Lim, Tax Department Global Chair, +1.212.906.1298
Jesse Sheff, banking partner and project team co-lead, +1.212.906.4524