Proposed Tax Regulations May Allow Foreign Assets to Serve as Credit Support
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- The IRS issued proposed regulations that may allow a US parent corporation to include foreign assets in its collateral package without adverse US tax consequences.
- Lenders may require a US parent corporation to offer foreign subsidiaries’ assets as credit support or pledge 100% of the stock of its foreign subsidiaries.
- Borrowers must weigh potential lower borrowing costs against change-in-law risk and non-US impediments to providing non-US collateral.