Developments Regarding Section 316(B) Of The Trust Indenture Act

On April 25, 2016, an Opinion White Paper was issued by a group of 28 law firms to provide guidance to practitioners in rendering legal opinions regarding Section 316(b) of the Trust Indenture Act. 

As discussed in the white paper, the ability to give an unqualified legal opinion with respect to a transaction that implicates Section 316(b) under the general principles discussed in the White Paper will often depend upon the factual issue of whether the issuer of the affected debt securities is solvent after giving effect to the subject transaction or series of related transactions.  The white paper proposes three alternative methods of dealing with the solvency issue: first, an express assumption that the issuer is solvent; second, reliance on a customary solvency certificate from a responsible officer of the issuer; or third, reliance on a third-party solvency opinion.