The potential imposition of liability on lenders for the environmental problems of their borrowers and other entities in which they hold investments has resulted in sharply increased interest by financial institutions in the management of environmental matters. Beveridge & Diamond, P.C.’s extensive environmental experience, combined with our corporate and real estate knowledge, enables us to provide financial institutions with valuable assistance in evaluating environmental issues in the context of secured loans and other investments.
Frequently our involvement in the evaluation of environmental liabilities on behalf of financial institutions is in the context of a loan or investment in an environmentally sensitive business, such as waste disposal, chemical or steel manufacturing, mining or petroleum processing. Our representation of the financial sector is not limited to these types of transactions, however. Significant environmental liabilities can arise and pose problems for financial institutions who act as lenders to or investors in virtually any type of project that involves real estate holdings or manufacturing operations.
- We evaluated potential environmental liabilities associated with an integrated steel manufacturing facility on behalf of the lender to the potential purchaser. This review focused on the potential costs of addressing on-site disposal areas, and also included permitting and compliance issues arising under air, water and other regulatory programs.
- We served as outside counsel to the Resolution Trust Corporation (RTC) and its successor, the Federal Deposit Insurance Corporation (FDIC), for the RTC's sealed bid sales of approximately 270 environmentally impaired assets. These transactions involved real properties and asset-based loans located in more than 30 states with a book value of more than $475 million. The properties ranged from inner city commercial office buildings to rural raw land, and had a variety of environmental concerns, including asbestos, underground storage tanks, landfills, groundwater contamination and developmental restrictions (such as wetlands). Our work in connection with these "Environmental Portfolio Sales" consisted of evaluating and developing disclosure documents covering the environmental conditions of the properties, preparing and negotiating the contract and seller financing documents for the transactions, including environmental remediation agreements, and resolving title, settlement and closing issues.
- For the lender to a potential purchaser, we evaluated a petroleum refinery, associated docking, pipeline and bulk storage facilities, and a chain of retail gasoline stations. This assessment included a detailed review of all significant environmental permitting, compliance and cleanup issues facing the company, and included recommendations to reduce future compliance costs in light of expected regulatory changes.
- We regularly conduct environmental due diligence on behalf of a global private equity organization that provides equity and mezzanine capital financing to companies in a wide range of businesses, and advise the organization on structural alternatives for its investments to minimize the risk of environmental liabilities.
- Our environmental due diligence on behalf of another private equity entity resulted in the identification of significant on-site contamination at the primary manufacturing facility owned by a company under consideration by our client for a significant equity or debt investment. We assisted our client with a complete restructuring of the proposed transaction to reduce its risk of environmental liability, including the addition of a third party firm to purchase and remediate the contaminated property.