Partner Shai Schmidt recently spoke with Octus about the impact of nondisclosure agreements (NDAs) on LMEs.
“An NDA can limit lender-signatories’ ability to challenge or try to prevent the consummation of any future LME, even though the deal terms are not yet known,” said Shai. “Such an NDA could serve as a tool for a sponsor to increase the odds of securing full participation in the LME in advance. There is nothing inherently wrong with that, but lenders should fully understand the tradeoffs.”
Shai added, “On the one hand, there is often a benefit in going under the tent and potentially securing a favorable deal. On the other hand, it can handcuff a lender at a juncture when there is still significant uncertainty concerning the eventual deal. My advice, as obvious as it may sound, is to carefully read the NDA and understand what rights you are giving up.”
“We have unfortunately seen situations where lenders signed an NDA only to learn later that they had given up more rights than they had realized and were unhappy with the terms offered to them,” he said.
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