Commercially Reasonable Debt Opinions

Kroll Corporate Finance advises companies as to whether the economic terms of their intercompany debt are commercially reasonable.

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Companies issue debt securities to related parties for numerous reasons. It is critical that such debt is respected as debt by tax authorities. One key factor in assessing if an intercompany debt should be characterized as debt for tax purposes is whether or not the terms of the debt are “commercially reasonable”, defined as being substantially similar to the terms to which an unrelated third party bargaining at arm’s length would reasonably be expected to agree.

Kroll’s advice can cover the amount of the proposed leverage in the capital structure, the interest rate on the debt, and the other economic terms of the debt security. In addition, Kroll is often requested to provide a financial opinion regarding the commercial reasonableness of the economic terms of the debt and the leverage in the company’s capital structure.

The following are typical transactions for which Kroll has been engaged to provide advice and opinions with respect to intercompany debt:

  • Multi-national companies utilizing intercompany debt in cross-border acquisitions or in recapitalization or restructuring transactions
  • Current equity holders of a company providing additional capital in the form of debt
  • Canadian Income Fund offerings and other similar transactions

For nearly 15 years, company management, boards of directors, trustees of income funds as well as tax attorneys and tax advisors have relied on Kroll’s advice and opinions to support their view that an intercompany debt security should be characterized as debt for tax purposes.

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Christopher Janssen
Chris Janssen
Managing Director and Global Head of Transaction Opinions
Fairness and Solvency Opinions
Chicago
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Corey Bleil
Corey Bleil
Managing Director
Fairness and Solvency Opinions
New York
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Elyse Bluth
Elyse Bluth
Managing Director
ESOP and ERISA Advisory
Chicago
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Andrew Capitman
Andrew Capitman
Managing Director
Fairness and Solvency Opinions
New York
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Sheryl Cefali
Sheryl Cefali
Managing Director
Fairness and Solvency Opinions
Los Angeles
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Jeff Gordon
Jeff Gordon
Managing Director
Fairness and Solvency Opinions
Chicago
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David Herr
David Herr
Managing Director
Fairness and Solvency Opinions
Philadelphia
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Todd Kaltman is a managing director at Duff & Phelps.
Todd Kaltman
Managing Director
Fairness and Solvency Opinions
Los Angeles
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Mark Kwilosz
Mark Kwilosz
Managing Director
Fairness and Solvency Opinions
Chicago
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David Lee
David Lee
Managing Director
Fairness and Solvency Opinions
New York
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David Rowe | Transaction Opinions | Kroll Chicago
David Rowe
Managing Director
Fairness and Solvency Opinions
Chicago
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Jeffrey Schiedemeyer
Jeff Schiedemeyer
Managing Director
Fairness and Solvency Opinions
Chicago
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David Turf
David Turf
Managing Director
Fairness and Solvency Opinions
Chicago
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