United Community Bank has done something a lot of financial institutions might envy: It has sold $103 million of non-performing mortgages and bank-owned properties to an investor at book value and set itself up for a continuing cash infusion from stock sales in the bargain.

One of UCB’s lawyers, James W. Stevens at Kilpatrick Stockton, referred to the complex deal as a “new, new thing … it’s a new form of transaction.”

He said UCB, which is owned by Blairsville-based United Community Banks Inc., the third-largest bank holding company in Georgia, has been a client of the firm’s for more than 20 years. The bank and its lawyers put together a multipart deal, first agreeing to sell about 25 percent of its non-performing assets—primarily residential and commercial loans and other real estate owned properties—to New York-based Fletcher International Inc., represented in this deal by the New York and Palo Alto, Calif., offices of Skadden Arps Slate Meagher & Flom.

“They sold the assets at book value,” Stevens said. “You can move anything if you want to sell at a deep discount … so selling at book value was a big plus for them.”

Another part of the deal was a stock purchase agreement, which gave Fletcher the right to buy $65 million of the holding company’s preferred convertible stock at $1,000 per share, according to an 8-K filed with the Securities and Exchange Commission. Fletcher also gets a warrant in connection with the asset sale allowing it to buy common-stock-equivalent junior preferred stock exercisable up to $30 million. An additional $35 million will be granted if all the preferred stock is purchased.

If Fletcher doesn’t buy all the preferred stock, which is convertible to common stock, by May 2011, it must pay UCB 5 percent of the amount it did not purchase and an additional 5 percent of any amount not purchased by May 2012, according to one of UCB’s 8-K filings.

Another aspect of the deal, according to the SEC filings, was that UCB loaned about $82.4 million of the purchase price, and Fletcher paid $20.6 million in cash. Fletcher also deposited another $18 million with the bank to pre-fund an estimated three years’ of interest, principal amortization and other costs.

“This was something that came together through, honestly, just the persistence and creativity of the officers at United Community Banks,” Stevens said, speaking of CEO Jimmy Tallent, CFO Rex S. Schuette and Chief Risk Officer David Shearrow.

The deal came together quickly. Stevens said discussions began last year, but most of the work was done in a four-to-six-week period this spring thanks to what he jokingly called 12-hour “half-days” of work for the Kilpatrick team, which included Atlanta partners Hilary P. “Hil” Jordan and Richard R. Cheatham, and partner W. Randy Eaddy in Winston-Salem.

The deal needed to move quickly, Stevens said, because the stock aspect requires shareholder approval, and this meant relevant information had to appear in UCB’s April 15 proxy statement to prepare shareholders to vote on May 26.

“There’s a potential issuance of common stock as a result of this transaction in excess of 20 percent of the existing common stock,” he said. If the shareholders don’t approve that potential issuance, he said, “The deal will be capped at 19.99 percent.”

When IntercontinentalExchange landed $725 million in new senior unsecured revolving credit facilities from a syndicate of lenders, it tapped Locke Lord Bissell & Liddell partner Philip A. Cooper to lead the deal.

IntercontinentalExchange, known as ICE, operates regulated futures exchanges and over-the-counter markets for agricultural, credit, currency, emissions, energy and equity index contracts. The company, according to an 8-K filed with the Securities and Exchange Commission, is using the new funds to replace a $100 million facility it terminated and a $300 million senior unsecured revolving credit facility which was set to expire in early April.

Much of the funds are slated to provide liquidity for ICE’s clearing-house subsidiaries in England, Wales, Canada and the United States.

The lenders on the new facilities, which have a three-year term, are Wells Fargo and Bank of America. They were represented by attorneys from the Charlotte office of Robinson, Bradshaw & Hinson. Along with Cooper, Locke Lord associate Enan E. Stillman and ICE’s associate general counsel, Andrew J. Surdykowski and assistant general counsel, David C. Clifton, also worked on the deal.

In a market largely bereft of real estate deals, federal stimulus programs and funds are creating work for dirt lawyers—and tax and bond counsel, too.

Althea J.K. Broughton at Arnall Golden Gregory is one of those lawyers. Her team recently closed two multifamily affordable housing transactions, one in the City of Decatur, the other in Union City. Both deals involved a complex mix of funding sources and took more than a year to complete.

The $5.8 million Decatur project, called Allen Wilson Phase I, will be located in downtown Decatur at Robin Street, Electric Avenue and Commerce Drive. Broughton, along with Arnall lawyers Alison M. Drummond, James T. Rauschenberger and A. Rian Perry, represented the Decatur Housing Authority and two affiliates to negotiate financing for the city’s first mixed-finance transaction of this type. The housing authority’s general counsel, Alan E. Rauber of McCurdy & Candler, also was involved.

“I think this deal is somewhat unusual,” Broughton said. “Typically, first of all, there are not very many bond deals that are closing in this environment, so when I say unusual, I mean that. Also, this was not your typical bond deal with an issuer and an indenture and a trustee. This was a little bit different in that you had the housing authority issuing notes that were purchased by Fannie Mae as part of a tax-exempt execution.”

Broughton said she helped her client get various approvals from the Department of Housing and Urban Development, which requires them in mixed-finance transactions. She said the tax-exempt bonds required HUD approval because the Decatur Housing Authority was essentially borrowing against a future stream of funds from HUD, then using those rights as collateral on a tax-exempt loan from Fannie Mae. The lawyers also got HUD approval for the receipt of stimulus funds under the American Recovery and Reinvestment Act, or ARRA.

Caryl Greenberg Smith of Hunton & Williams, who served as bond counsel on both the Decatur and Union City deals, said that Fannie Mae is trying to promote affordable housing by purchasing notes directly rather than having the housing authority market the notes publicly. Such deals, she said, can offer a “huge, huge reduction in the interest rate compared to what you would have gotten in the market.”

The bond aspect of the Decatur deal also yielded 4 percent housing tax credits from the Georgia Department of Community Affairs, Broughton said, which were then sold to equity investor Peachtree Investment Solutions, LLC, represented by Aaron J. Kowan at Taylor English.

Kowan said his client invested about $2 million, but that the deal’s sophistication and complexity was on par with $30 million projects. “For the size of the deal, it was probably the most complicated deal I ever worked on. I wish I’d known that before I took the deal,” he said, and laughed. “I was working on a flat fee.”

Kowan, a tax lawyer who worked on the transaction with associate Brandon C. Hardy, said the deal was complex because it involved three to four levels of debt, each with unusual business and tax issues related to the public-private partnership, and unusual guaranty provisions related to HUD backing.

In the Union City deal, Broughton’s team represented Ambling Development Partners, which plans to build a 150-unit elderly housing complex known as Woodbridge at Parkway Village at the intersection of Southwood Road and Thompson Road.

Broughton said this deal, worth $16 million, included ARRA stimulus funds through HUD and bonds which were credit-enhanced by the Federal Housing Administration to make them more marketable. The bonds, which are tax-exempt and yield a 4 percent tax credit, were purchased by equity investor Community Affordable Housing Corporation, represented by Robert G. Coberly from Bryan Cave’s Washington office.

Broughton said stimulus funding was crucial to both deals, and is providing a boost to real estate work in general. “I really think the stimulus funds have actually helped save some deals or made some deals viable and have gotten them to closing,” she said. “Initially we all had to figure out how those funds would work, but I think they’ve promoted a lot of development activity.”

A $400 million deal is rare game these days, but Alston & Bird partner Janine Brown was fortunate enough to bag one.

She and associate David A. Wender, along with Canadian firm Lang Michener, represent Georgia-Pacific in its recently announced deal to purchase four compressed-board facilities from Grant Forest Products, a Canadian company that in June received judicial protection from creditors after a General Electric Co. unit tried to force it into bankruptcy.

The transaction, which is expected to close in the first half of this year, is subject to approval from the Canadian court overseeing Grant’s agreement under the Companies’ Creditors Arrangement Act, which protects Grant from lawsuits and creditors, but allows it to continue operations.

A Georgia-Pacific spokesman said that the deal also will be subject to approval by a U.S. bankruptcy court, but he could not immediately identify which one.

Brown and Wender could not be reached for comment by this blog’s posting deadline.

The deal also is subject to U.S. and Canadian regulatory review.

The factories, which produce what is called oriented strand board, an engineered wood product used for, among other things, subflooring, are located in Englehart and Earlton, Ontario, and in Allendale, S.C., and employ about 300 workers. When market conditions allow, Georgia-Pacific plans to complete construction on another plant, in Clarendon, S.C., which could employ 100 more people. The company, in a statement, also said it plans to make capital investments of “several million dollars” to improve facilities.

Grant’s financial troubles, which were exacerbated by the lagging construction market, had about $516.8 million in secured debt, according to a Bloomberg story published in June. The article said that General Electric asked a judge to put Grant into bankruptcy because of debts related to airplanes Grant leased from a GE division.

The franchisor of the popular Mellow Mushroom pizza joints just got a bigger piece of the money pie thanks to a $25 million credit facility from GE Capital.

Given the tight-fisted credit markets, almost any sort of leverage is news these days. So it’s remarkable that Atlanta-based franchisor Home-Grown Industries of Georgia Inc. landed a five-year senior term loan of $21 million and a $4 million revolving credit facility.

“Frankly, I was surprised that we were able to get this deal done on a senior debt basis,” said Lawrence M. “Larry” Gold, the Carlton Fields partner who represented Home-Grown. “I give credit not only to the company but also to [investment bank] Croft & Bender for finding someone like GE Capital who was willing to finance this without a mezzanine piece and without an equity piece. That’s tough to do even in good economic times.”

(For those of you not versed in deal-speak, a credit facility is simply a loan or collection of loans or letters of credit taken on by a corporation; senior debt is debt that merits priority repayment in the event of a liquidation; mezzanine financing is, generally speaking, a hybrid of debt and equity-based financing; and pepperoni is--oh, never mind. Do you really wanna know?)

Gold, who has represented the franchisor in various capacities for about three years, said the deal came together extremely quickly—in just six weeks—because GE Capital, represented by lawyers from Kutak Rock’s Denver office, wanted to book it in the third quarter.

Several factors influenced Home-Grown’s ability to get the loans, according to Gold. The privately owned company, he said, is extremely well run and franchises are one type of business lenders still are willing to finance.

Also, it had very little senior debt—between $5 million and $6 million—and it increased profits even in the down economy.

Gold explains the profit increase by quoting Mellow Mushroom CEO Richard Brasch: “Even in tough times, people eat pizza and drink beer.”

Brasch, reached at his office, amended that quote a little, saying, “Actually, people eat pizza and probably drink more beer, depending on how tough times are.”

And they do so at more than 100 Mellow Mushroom franchises, most of them in Georgia, North and South Carolina, Tennessee, Alabama and Florida.

As for Gold, he praises his client’s ability to provide value for the money, saying: “Their pizza’s not the cheapest, but it’s good, and that’s a value proposition that works.”

His favorite slice is topped with tomato sauce, cheese, mushrooms—and a smidge of onion.

On Wednesday, Arnall Golden Gregory partner Tycho Stahl was driving on the Autobahn near Münster, Germany, logging yet more miles on what has, so far, been a two-week, 3,000-mile road trip to meet with clients interested in doing business in the United States.

But his thoughts weren't only on the roadway famous for its high rates of speed. He was focused on Meriwether County, Ga., where he'd just completed a $9 million deal to bring the U.S. affiliate of a German client that makes components used in steel manufacturing to the rural south.

It's just one of a number of cross-border transactions that Stahl, a German native educated in the United States, is juggling these days. Speaking on his cell phone, he said that European companies—many of them family-owned and able to fund transactions with their own cash rather than by chasing scarce bank financing—are looking for opportunities in the United States because they have clients here.

U.S. communities are making them feel welcome with tax incentives, financial guarantees and help in training employees, constructing buildings and acquiring land and equipment.

Stahl's client, Gustav Wiegard Maschinenfabrik GmbH & Co., is a fourth-generation family business based in Witten, Germany, and its U.S. affiliate, Gustav Wiegard North America LP, is financed by a number of investors from around the globe. Wiegard manufactures huge, multi-ton rollers used to flatten cold-rolled steel.

The company, said Stahl, wants to come to the United States because one of its clients, ThyssenKrupp Steel and Stainless USA is building a $4.6 billion state-of-the-art steel and stainless steel processing facility in Calvert, Ala.

Meriwether, a rural county about 50 miles southwest of Atlanta with a population of about 22,500 spread over about 500 square miles, used a combination of incentives, financing and good chemistry to compete successfully against a number of other communities and win the deal.

Tyron C. Elliott of the Elliott Law Firm in Manchester, Ga., represented the Meriwether County Industrial Development Authority. “We've worked with Gustav Wiegard for a year, and we went to Germany to tour their plants,” he said. “We didn't know a great deal about the business of making these steel rollers, so we had to learn a lot.”

One of the things they learned, he said, is that the Wiegard executives weren't just interested in the bottom line; they were interested in developing a good, working relationship with the authorities in the region where they located.

So the Industrial Authority, along with the Metro Atlanta Chamber of Commerce and the State of Georgia worked together to offer Wiegard a deal. That deal, said Elliott, includes building the company a 30,000-square-foot, $2.5 million to $3 million plant, financed in part by the Industrial Authority via a loan from F&M Bank and Trust Co. which will be offered to Wiegard on a 10-year lease-purchase arrangement. The building will be in a state-of-the-art industrial park that already has one international business in operation, the Korean Dongwon Autopart Technology, which supplies components for the Kia Motors automobile plant in West Point, Ga.

The deal also includes financing for Wiegard's equipment and machinery, provided by another local bank, Meriwether Bank & Trust. And it includes a rebate on Georgia income and unemployment taxes under a state economic stimulus program and access to an employee job training program through a branch of West Georgia Technical College.

A number of other communities offered incentives, too, said Elliott, and delegations from Auburn and Pell City, Ala., even traveled to Germany to meet with Wiegard executives.

“There are many high-quality communities, high-quality industrial parks that have great highway access, great can-do attitude and are willing to make land available,” said Stahl. “I think where Meriwether came out ahead is they all put their shoulders together and pulled. It's the State of Georgia; it's the Metro Atlanta Chamber of Commerce; it's the county, which provided loan guarantees; the local banks; the developer; the Meriwether Industrial Authority.” And, he said, they all worked to develop relationships with Wiegard.

Wiegard, with revenues Stahl estimates in the low nine-figure range, has sales offices all over the world, including one in Washington State. But it now will consolidate its U.S. operations in Meriwether County, where the plant is expected to be up and running by mid-2010. Elliott said the plant, which is planned as a multiphase project, initially will employ 50 people, and later add about 30 more.

Stahl, who worked on the deal with about a dozen other Arnall Golden lawyers including John L. Gornall, Steven A. Kay, Neil P. Mulcahy, Hyun-Zu “Yonni” Kim, John G. Spinrad and Stephen P. “Steve” Pocalyko, said his team's work includes negotiating and drafting project agreements and contracts, handling employment-related legal work, real estate issues, environmental matters and permits and financing for construction and suppliers.

He said Wiegard, like his other European clients—the one he was driving to see on Wednesday was a supplier for the oil and gas industry interested in coming to Texas—also want their U.S lawyers to minimize their risks of doing business here.

So what Stahl and his team also do is set up U.S. arms of the company early on, negotiate with customers and suppliers so that the contractual risk stays with the U.S. entity and set up insurance so that liability stays with the U.S. entity.

“People have heard horror stories about product liability and similar things in the United States, and about lawyers run amuck. They worry about market risks.” But, he added, “Georgia has some pretty amazing [incentive programs], as do other states. All of those things help reduce the risk to foreign companies entering the U.S. market. Most Europeans when they come to the region are favorably surprised by the engagement in the region.”

Hard on the heels of handling more than $1 billion in financing transactions for Delta Air Lines earlier this month, Kilpatrick Stockton partner Benjamin W. Barkley found himself wondering—in these deal-starved times—what he’d be doing next.

But before he even had time to catch up on his sleep, he was representing longtime client Five Star Food Service in its recapitalization by Navigation Capital Partners. Chattanooga-based Five Star, which provides vending, coffee and food services, has long been a portfolio company for Atlanta-based private equity firm Navigation.

Though financial terms of the deal were not disclosed, Barkley, who worked on the transaction with partner Todd C. Meyers, said, “It was a refinancing, a paying off debt and additional investments. Like everybody else.”

The deal increases Navigation’s majority ownership stake in Five Star, and also makes Five Star a franchisee of Canteen Vending Services, an operating company of Charlotte-based Compass Group North America, according to information from the companies.

Attorneys from Reed Smith represented Navigation in the deal.

Cindy J.K. Davis is an expert in cross-border sleep deprivation.

When the Paul, Hastings, Janofsky & Walker corporate partner closed a $500 million syndicated credit facility for client Rabobank Nederland earlier this month, it was truly a global, round-the-clock deal with a closing that kept lawyers working more than 30 straight hours.

Davis and her team of eight attorneys advised Rabobank as lead arranger and administrative agent in replacing a revolving credit facility for Coral Gables, Fla.-Fresh Del Monte Produce Inc. and some 35 of its subsidiaries around the world, 10 of which were borrowers and another 25 or so that served as guarantors. 

The transaction, according to Davis, involved 25 other banks and employed 20 law firms—including Fresh Del Monte’s in-house lawyers and outside counsel at Cleary Gottlieb Steen & Hamilton in New York.
It also tapped into the laws of 15 far-flung jurisdictions, including Panama, Gibraltar, Liberia, Hong Kong, Chile, Japan, Costa Rica, the United States and the United Kingdom.

To secure the deal, Davis said, her team took liens on personal property in five countries and pledges of stock in 15 others.

The biggest challenge of a deal of this type is just dealing with the complexity of the collateral package for the number of countries and companies involved,” Davis said. “You have to have an understanding of the different legal systems involved to … know can we even take a lien of this type.”

As an example, she said, suppose you take a pledge of stock from a Liberian company with a parent company based in Hong Kong that serves as the pledgor. “Which country’s law should govern, or will New York law work?” she said.

Answering that question involved tapping into the expertise of local counsel around the world, as well as lawyers in Paul, Hastings’ Hong Kong, Japan and United Kingdom offices.

“There’s a lot of complexities involved in just the basic legal framework,” she said. “And then you have to make sure you satisfy all the documentation requirements in each jurisdiction, not just what the document provides on its face, but what other ancillary documents are required. Something as simple as how a document should be executed or signed may be different than in the United States.”

Rabobank, assisted by the Paul Hastings team, put together a syndicate of about 25 other lenders, each of which loaned a percentage of the overall amount to Fresh Del Monte. Once Rabobank and Fresh Del Monte had worked out the terms of the credit facility, the lawyers distributed the documents to the different lenders, gave them an opportunity to comment, coordinated collateral around the world and fielded comments and questions from all the different lenders.

Davis said a major factor in inking a deal of this size in this economy is that Fresh Del Monte had a long-term relationship with Rabobank, which specializes in lending to the food and agricultural industry. But, she noted, Fresh Del Monte did not have as much negotiating power in the credit agreement as it might have had in a more robust economy.

“Lenders in syndicated deals these days are looking for tighter restrictions on companies because of today’s credit standards as this relates to events of default and other covenants in the loan documents,” she said.

Despite the transaction’s level of complexity—the closing checklist alone ran to more than 40 pages—Davis said the deal moved fast.

The lawyers started negotiating the term sheet three months before closing, she said, and the bank met with all the lenders about four weeks prior to closing, which is when most of the international work was done.

“We wound up closing the transaction on a Thursday morning in our office here at 9 a.m., and we worked continuously until Friday at about 2:30 p.m. … All night long, no sleep,” she said. “That’s not unexpected with a deal this size, with all the different time zones involved. It was kind of a rolling call of lawyers all night long in order of time zones.”

And that, she said, is after staying up until 3 a.m. for a week previously, working on various aspects of the deal.

Despite the global nature of the deal, Davis didn’t get to travel to the tropical locales where many of the lenders and Fresh Del Monte subsidiaries are located. “I did it all from the U.S.,” she said. “I would love to have gone … to Costa Rica to eat the pineapple right in the field … [but] with e-mail these days, there’s really no need to travel.”

Morris, Manning & Martin attorneys Edward D. Hirsch, William Winter and Christopher S. Maxwell, helped software provider O4 Corp. in its deal to land $15 million in Series A financing.

The lender is ABS Capital Partners, with offices in Baltimore, Boston and San Francisco. ABS was represented by Michael Silver and Mahvesh Qureshi, both with Hogan & Hartson’s Washington office.

O4, whose North American headquarters are in Atlanta, makes software that helps consumer product suppliers automate their field sales, marketing and merchandising and to direct store delivery operations via a mobile software system that links head-office management with representatives in the field.

They say there’s a credit crunch, but you wouldn’t know that to look at the $775 million in loans that IntercontinentalExchange, Inc., just landed with the help of a team of lawyers from Locke Lord Bissell & Liddell.

According to an 8-K for the Atlanta-based company, which operates Internet-based marketplaces to trade futures, over-the-counter energy and commodity contracts and derivatives, the publicly-traded ICE swapped some outstanding credit facilities for the new $775 million in loans provided by a syndicate of banks. The syndicate was led by Wachovia Bank, N.A., and Bank of America, N.A.

Locke Lord partner Philip A. Cooper was lead outside counsel on the deal, working with ICE’s Associate General Counsel Andrew J. Surdykowski and Assistant General Counsel David C. Clifton, as well as Locke Lord associates Valerie Barton and Alexis Summers.

The banks were represented by partner Jeffrey A. Henson and associate Neill G. McBryde Jr. with Robinson Bradshaw & Hinson in Charlotte.

The new credit facilities provide for a 364-day senior revolving credit facility in the aggregate principal amount of $300 million, a three-year senior revolving credit facility in the aggregate principal amount of $100 million, a three-year senior term loan facility in the aggregate principal amount of $200 million and an amended senior term loan facility in the aggregate principal amount of $175 million.