www.lexpert.ca/usguide | LEXPERT • June 2019 | 29
have significantly narrowed."
Pennycook says US private-equity
funds doing a transaction in Canada can
access either US or Canadian lenders, and
many doing cross-border transactions
will divide it up and use a revolving credit
facility with their primary US lenders, but
bring some Canadian lenders into it as
well. ey'll generally do a term facility, a
single draw to be paid back on maturity if
not before, with US lenders.
She says US Term Loan B – loans made
by institutional investors whose primary
goals are to maximize long-term total
returns – traditionally have much more
relaxed covenants and financial tests, and
allow greater leverage. And Canadian
lenders who want that business are coming
under pressure to offer equivalent terms.
"But when you have two facilities with
the same borrower you can ultimately
expect that borrower is going to say, 'Our
US lenders let us use this, so we want you
to make the same amendments, to make
the same consents as well.'
"I foresee Canadian borrowers [on
cross-border financing transactions]
saying, 'We've got that in our US debt
facility so we want that in Canada as well.'
Good borrowers can exert that pressure
very effectively, and they are."
Pennycook says Canadian PE lenders –
mainly banks and pension funds – aren't
losing significant market share to US
lenders over more favorable terms so far,
"but they're certainly having their feet
held to the fire."
But forget the fire for a moment. ere's
one sector where US lenders can't hold a
candle to Canadians: cannabis.
"Marijuana's been a very hot commod-
ity that's caused a lot of lawyering and a
lot of transactional work," says Mitchell
Gropper, a partner at Farris, Vaughan,
Wills & Murphy LLP in Vancouver.
"We've represented some US buyers
who've come to Canada — US lenders
and US banks won't touch these transac-
tions. ey can't.
"In those states in the US where
marijuana's legal they can't even use the
national banking system or the credit card
system."
In states where marijuana is legal, says
Gropper, US companies that want to
buy a Canadian marijuana company can
presumably tap state chartered banks,
"which are much like credit unions in
Canada." But they might not get the same
favorable terms they would from a large
