A One Step Guide To The Day-to-day Life Of A Junior Transactional Associate In Bank Lending Law
“Transactional law.” It’s a phrase you hear often in law school by fellow students who are obvious they want nothing to do with an actual courtroom or the life of a prosecutor on Law and Order. Yet few law students actually seem to understand what the practice of law is like for transactional attorneys and often have no clue what the typical day of a junior or senior associate at a large firm would be like, much less how the different subsets of transactional law differ or the skill sets you need to succeed in this line of work.
I was once this very same law student, with little to no idea of how the real world of law functioned aside from what I had seen on TV and read in my law school books. While classes like evidence gave me an image of what the actual practice of litigation would be like, classes like corporations gave me very dinky insight into what the actual day-to-day life of a transactional attorney would be like. This bothered me very shrimp, however, because I had always imagined myself going into litigation at a large New York City law firm anyway. Imagine my surprise then, when my law firm assigned me to their Finance Department.
I think when most law students hear the term “transactional law,” their minds jump immediately to corporate law, mergers and acquisitions, and possibly even the litigation-transactional hybrid that is bankruptcy. Transactional law, however, is a general term that refers to all of the legal rules that go along with the negotiating and drafting of business transactions and business contracts and includes a variety of other fields beyond corporate law. I could make my line of work sound complicated and use terms like “Mezzanine Investments,” “Syndicated Loans,” or “Asset-backed Loans,” but it all pretty much boils down to the negotiating and drafting of a contract in which a bank (or other financial institution) lends a specified amount of money to a corporation or individual for a certain period of time.
So what does a junior associate do in the Finance Department? Here is a list of the top 5 activities that took up the majority of my time:
5. Due Diligence
If you’re a law student, I’m sure you’ve heard this word thrown around quite a bit as the most hated part of transactional law and the counterpart to litigation’s document review, but you probably don’t really know what it means or what it entails. Due Diligence in Bank Lending is essentially an investigation into whether or not any road blocks to a successful loan exist. First, you must understand the transaction ‘” What does the company do? How much are they borrowing? What sort of collateral is backing the loan? What will the money be used for? While it depends on which side you are representing, you will generally need to examine loan agreements the Borrower has entered into, financial statements, corporate documents, and many other relevant and related documents. Objective to scare you, examples of these documents include credit agreements, the company’s certificate of incorporation and bylaws, UCC financing statements, security or pledge agreements, intercreditor and subordination agreements, liens and encumbrances, and both audited and unaudited financial statements. It is then your job to prepare a due diligence memorandum summarizing what you have found ‘” with particular emphasis on any “Red Flags” that may hinder the loan process. These things may be minor, for example, if the by-laws prove that only the President of the company has the power to enter into loan agreements, you’ll want to be definite that it is the President who signs all the loan documents. Or they can be extremely crucial like if you are representing the bank and plan on asking for all of the company’s assets as collateral (property you can capture from them if they don’t pay you aid). It is then important to be sure that the company has not already entered into a similar agreement with some other bank or corporation granting them rights to that same collateral, thus taking priority over your claim.
You may be wondering why I’ve placed this at #5 since it sounds so crucial. It normally is a huge part of any junior transactional lawyer’s day but because I began my job when the economy crashed, we simply weren’t entering into many new bank loans with large companies where an intensive due diligence review was required. Still, you should probably expect to spend a good section of your time engaging in this sort of activity. The good news? It is extremely time intensive and great for upping your billable hours, something which is crucial in this economy.
4. Research and Writing
Research and writing memos is probably one of the top tasks that a junior litigation associate engages in on a regular basis. Not so for transactional associates, especially in the finance department. This should actually be a bit higher on the list for me because I was their go-to junior associate for research and writing, but for the most part, this is a minor part of the job. It is especially rare for you to have to search among cases on Lexis or Westlaw. This is because most of what you’ll need is all in the handy tiny book of your state’s edition of the UCC, with particular emphasis on Article 9: Secured Transactions, Sales of Accounts & Chattel Paper. If you are thinking about working in bank loans, add Secured Transactions to the list of classes to lift during law school. It is by far the most helpful class you will take because this fraction governs the perfection of a security interest in the collateral ‘” a crucial part of a successful bank loan. Since Article 9 was recently revised, most of the research issues you’ll see crop up are simply because partners are unfamiliar with the new laws and want you to take a quick explore and get back to them with a straightforward correct answer.
3. Organizational Tasks & Other Paralegal Duties
Let’s be honest. This is just not the time to be going into the bank lending business. Because of this, you may find yourself slower than other departments, and you may acquire that the associates who are senior to you are hoarding work that would normally be funneled down to you in order to meet their billables. This is a bad thing, and despite claims to the contrary, you are in no intention, shape or form “safe” as a first year associate. Your billables matter. Because of this, you may find yourself hoarding work that would otherwise be done by a paralegal or even a secretary. This can entail creating the closing binder (a bound set containing final copies of all the loan documents and current signature pages), scanning and uploading documents onto the computer system to be e-mailed around to opposing counsel and clients, filing UCC financing statements, collecting and organizing original signature pages, updating the closing checklist for the deal, setting up the deal room, and pretty noteworthy anything else you can possibly do that will add some billable hours to your schedule. Also included in this category are the extremely boring and monotonous tasks that could be done by a monkey ‘” like looking through a 100 page loan agreement and making sure all the words defined in the Definitions fragment of the agreement actually appear somewhere in that agreement and conversely, that all the words that need to be defined are included in the Definitions section. At first, it will be common for you to be assigned to tasks like these. The senior associates want to be certain that you can do everything a paralegal can do just in case there comes a time at 3 am when there are no paralegals on hand. But in time, these tasks should be assigned to a paralegal as you take on larger tasks. In this economy, that may take awhile to happen. It all depends on your firm and the amount of work coming in. If you find your hours are lacking, however, hoarding this work is one way to get those hours up.
2. Drafting Documents
This is really the crux of transactional law. The more drafting of documents you do, the more you know that the senior associates trust you. You will begin with simple and shorter items, the most well-liked and easiest of which are amendments to the loan agreement and move on to the supplemental loan documents before finally tackling the actual credit agreement. Drafting these contracts are a diminutive different than what you might expect. Nobody is asking you to reinvent the wheel, and no matter how badly you assume a provision should be added in about XYZ, it shouldn’t. On your firm’s system there will no doubt be a boiler plate contract for a deal that has already been done with the particular corporation at hand. If there is, you should definitely use it and modify it to meet the contract at hand rather than starting from scratch. These terms have already been negotiated and do not need to be rehashed again. You may reflect a clause should be added to give your client further protection but there is a great chance that provision has already been thought about, discussed and rejected. Bring it up to an associate and ask about it, but don’t go around inserting things into the contract. Even if this is a new deal with a new corporation, there are probably still similar contracts out there that will save the client time and money by using it and will save your butt when you realize that you don’t know as much about drafting a contract from scratch as you belief you did.
1. Harassing Others
This is easily what I found myself doing the most. Each loan agreement requires signature pages from all of the parties involved, and often times the list goes on for quite a few pages. In this day and age, at the time of the closing, a PDF copy of each party’s signature is all that it takes and all the parties involved are always very diligent in PDFing their signature pages so that the deal can cessation in a timely manner. In the following weeks, as you compose the closing set, however, you will be asked to gather the original signed pages from each party rather than merely a PDF copy. This is where the harassing comes in because once the deal is done, people forget, go on vacation and objective cannot be bothered. You’ll fetch yourself emailing people over and over with constant replies of “Yes, I will do that,” only to never receive anything in the mail. In addition to harassing the parties involved, you will also find yourself harassing opposing counsel for copies of their documents, updates and finalized pdf versions of their agreements. In time, this harassing will be supplemented with negotiating but to begin with, expect to hound and annoy people to a distinguished greater degree than you thought possible.
And there you have it. Hopefully now you have a better idea of what you are getting yourself into before you start a rotation through a firm’s finance/bank loans department. Keep in mind, this is not the department you want to be in the current economy so if this is something you’re really interested in, be prepared to be proactive and fight your plan to the top!
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