Troubled Transactions

In the municipal bond market, the incidence of default or challenge from government regulators and owners of municipal bonds has increased dramatically.

This increase corresponds directly to the increase in the variety and complexity of the types of bonds issued, as well as the financing structures used and the sources of repayment and security for the bonds. Other contributing factors include the increasing complexity of tax and other laws pursuant to which bonds are issued, the requirements for disclosure of information, the duties of issuers, trustees, underwriters and other participants after, as well as before, issuance of the bonds, and the greatly increased enforcement attention to the municipal bond sector from the IRS and the SEC.

As one of the premier bond counsel firms in the country and one of few such firms with substantial litigation, tax, corporate finance and commercial law experience, Orrick has often been called upon to advise and represent clients in connection with bond issues that have run into some kind of post-issuance trouble. The increasing frequency of such engagements led the firm to create a Troubled Transactions Group. The purpose of this group is to mobilize lawyers with cross-disciplinary skills, to formulate strategies for the client, taking into account a wide range of legal and practical considerations. This Group is comprised of selected lawyers from several of our practice areas to combine expertise in:

  • Litigation (including SEC, IRS and other federal agency investigations and enforcement actions)
  • Public finance and municipal law
  • Tax aspects of municipal bonds
  • Securities law
  • Corporate and commercial law
  • Restructuring
  • We have been engaged by issuers, underwriters, financial advisors, trustees, credit providers, dealers, borrowers' bond counsel and other counsel with respect to a myriad of problems, including:

    • investigations, including audits, by the IRS, SEC, FBI and various self-regulatory organizations
    • litigation concerning alleged violations of federal and state securities laws
    • litigation concerning alleged breach of covenant (including alleged improper redemption or -acceleration)
    • litigation concerning administration of projects financed with bond proceeds
    • litigation concerning land-secured financings, such as assessment and Mello-Roos districts
    • taxpayer challenges to tax or revenue sources pledged to pay bonds and challenges to projects to be financed with bond proceeds
    • various types of challenges (including litigation) to the validity of bonds or underlying agreements
    • potential and actual defaults
    • tax, document and disclosure issues in default and wind-down situations
    • bankruptcy/receivership of issuer, borrower or other financing participant; preferential transfers, fraudulent conveyances; work-outs
    • working out problems created by servicers, insurers, investment agreement providers or others that become insolvent or fail to perform
    • disclosure responsibilities in light of potential or foreseeable default or other post-issuance events or circumstances
    • restructuring/refinancing transactions to avoid or to work out of a default
    • arbitrage compliance problems created by post-issuance changes in use of proceeds or by debt restructuring
    • allegations and litigation concerning conflicts of interest with respect to bond programs
    • investigations by us on behalf of clients of alleged breaches, defaults or wrongdoing or to check regulatory compliance or to address an effective use of remedies