CALDERWOOD & HARKNESS LLP 250 Park Avenue, 40th Floor New York, NY 10177
Telephone: (212) 455-7800 Facsimile: (212) 455-7801 www.calderwoodharkness.com
April 25, 2024
Robert Whitfield, Esq. Partner Whitfield & Donahue LLP 1000 North King Street, Suite 500 Wilmington, DE 19801
Re: Request for Delaware Law Opinions — Belmont Ridge Equipment Trust 2024-A — $48,000,000 Tap Issuance of Class A-2 Notes (CUSIP 07839LAB3 / ISIN US07839LAB36)
Dear Mr. Whitfield:
1. Introductory Paragraph / Engagement Context
Calderwood & Harkness LLP represents Belmont Ridge Bank, National Association ("BRB"), a national banking association organized under OCC Charter No. 91-4428, with its principal office located at 600 Lexington Avenue, 32nd Floor, New York, NY 10022, and Belmont Ridge Equipment Trust 2024-A (the "Trust"), a Delaware statutory trust formed on January 8, 2024, pursuant to the Delaware Statutory Trust Act, 12 Del. C. §§ 3801 et seq. (the "DST Act"). The Trust's registered agent in the State of Delaware is Capitol Trust Services LLC, located at 1209 Orange Street, Wilmington, DE 19801.
We are writing to request that Whitfield & Donahue LLP ("Whitfield & Donahue"), acting as special Delaware counsel to the Trust and BRB, deliver certain written opinions of Delaware law in connection with a $48,000,000 tap issuance of additional Class A-2 Notes (the "Tap Notes") under the Trust's existing Series 2024-A program. As you are aware, the Trust was established to facilitate the issuance of asset-backed securities backed by pools of small-ticket commercial equipment-lease receivables originated by BRB in the ordinary course of its equipment finance business.
The Tap Notes are being issued pursuant to Supplemental Indenture No. 2 (as defined below) to the Indenture dated as of January 29, 2024 (the "Base Indenture"), among the Trust, as Issuer, BRB, as Servicer, and Meridian Fiduciary Services, Inc. ("Meridian"), as Indenture Trustee. Supplemental Indenture No. 2 was duly executed and delivered on April 19, 2024 (the "Supplemental Indenture No. 2"). The Base Indenture, as supplemented by Supplemental Indenture No. 2, is referred to herein as the "Indenture."
The Tap Notes will bear a fixed coupon of 5.78% per annum, calculated on a 30/360 day-count basis, and will be issued at a price of 100.125% of par. The Tap Notes are fungible with the original $220,000,000 aggregate principal amount of Class A-2 Notes issued on the original closing date of January 29, 2024, and following the issuance of the Tap Notes, the aggregate outstanding principal amount of the Class A-2 Notes will be $268,000,000 and the total outstanding principal amount of the Series 2024-A Notes (inclusive of all classes) will be $398,000,000.
The tap issuance is being made pursuant to the Trust's effective shelf registration statement on Form SF-3 (Registration Statement No. 333-276891) filed with the Securities and Exchange Commission (the "SEC"). A Prospectus Supplement relating to the Tap Notes was filed with the SEC on April 22, 2024, pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended. The closing and funding date for the tap issuance is currently scheduled for May 17, 2024 (the "Closing Date").
We would appreciate your firm's prompt attention to this matter, given the anticipated Closing Date and the requirements of the underwriting agreement described below.
2. Transaction Documents for Review
In connection with rendering the opinions requested herein, we ask that you review and rely upon the following documents, each of which is described below and, to the extent currently available in execution form, is enclosed with this letter (collectively, the "Transaction Documents"):
1. Trust Agreement dated as of January 22, 2024 (the "Trust Agreement"), between BRB, as Depositor, and Keyline Trust Company, National Association ("Keyline"), as Owner Trustee, pursuant to which the Trust was established as a Delaware statutory trust under the DST Act;
2. Indenture dated as of January 29, 2024 (the "Base Indenture"), among the Trust, as Issuer, BRB, as Servicer, and Meridian Fiduciary Services, Inc. ("Meridian"), as Indenture Trustee, governing the issuance, authentication, and administration of the Series 2024-A Notes;
3. Supplemental Indenture No. 2 dated as of April 19, 2024 ("Supplemental Indenture No. 2"), among the Trust, BRB, and Meridian, authorizing the issuance of an additional $48,000,000 aggregate principal amount of Class A-2 Notes (the Tap Notes) and setting forth the terms and conditions applicable thereto;
4. Sale and Servicing Agreement dated as of January 29, 2024 (the "Sale and Servicing Agreement"), among BRB, as Originator and Servicer, the Trust, as Issuer, and Meridian, as Indenture Trustee, governing the sale or contribution of the initial pool of equipment-lease receivables to the Trust and the ongoing servicing obligations with respect thereto;
5. Amendment No. 1 to the Sale and Servicing Agreement dated as of April 19, 2024 ("Amendment No. 1"), among the same parties, providing for the sale and contribution of the tap pool receivables to the Trust, consisting of 1,247 additional small-ticket commercial equipment-lease contracts with an aggregate discounted receivable balance of approximately $49,344,000 (the "Tap Pool Receivables"), and making certain conforming amendments to the Sale and Servicing Agreement in connection with the tap issuance;
6. Underwriting Agreement dated as of April 19, 2024 (the "Underwriting Agreement"), among the Trust, BRB, and Ashford Capital Markets LLC ("Ashford"), as sole bookrunner and lead underwriter, setting forth the terms and conditions of the purchase and offering of the Tap Notes; and
7. The Certificate of Trust for the Trust as filed with the Secretary of State of the State of Delaware (the "Certificate of Trust").
In addition to the foregoing, we ask that you review such other organizational documents, certificates of good standing, resolutions, incumbency certificates, and filings as Whitfield & Donahue may deem necessary or appropriate in order to render the opinions requested herein.
We will arrange for the delivery of execution copies of all documents listed above to your offices in advance of the opinion delivery date. To the extent that any document has not yet been executed as of the date of this letter, we will provide such document promptly upon execution and, in any event, prior to the date on which you are asked to deliver the final opinion letter.
3. Requested Opinions
We respectfully request that Whitfield & Donahue deliver to us a written opinion letter covering each of the matters set forth in Sections 3(a) through 3(d) below, in each case under and as governed by the laws of the State of Delaware, including the DST Act and applicable judicial interpretations thereof. Each opinion is described in detail below.
3(a) Due Formation and Valid Existence
We request an opinion to the effect that the Trust has been duly formed and is validly existing as a statutory trust in good standing under the DST Act. This opinion should confirm that the Certificate of Trust for the Trust has been duly filed with the Secretary of State of the State of Delaware in accordance with 12 Del. C. § 3810 and has not been revoked, cancelled, or otherwise terminated as of the date of the opinion. For your reference, the Trust's federal employer identification number (EIN) is 88-4231957.
In rendering this opinion, we anticipate that you will review the Certificate of Trust, the Trust Agreement, and a current certificate of good standing for the Trust issued by the Delaware Secretary of State. We will provide you with a recently obtained good standing certificate, or, if you prefer, we can authorize your office to obtain one directly from the Secretary of State's office on our behalf.
3(b) True-Sale Characterization
We request an opinion to the effect that the transfer of the equipment-lease receivables from BRB to the Trust pursuant to the Sale and Servicing Agreement (as amended by Amendment No. 1), including the transfer of the Tap Pool Receivables (consisting of 1,247 small-ticket commercial equipment-lease contracts with an aggregate discounted receivable balance of approximately $49,344,000), constitutes a "true sale" or "true contribution" of such receivables under the laws of the State of Delaware, and does not constitute a secured financing or pledge of such receivables by BRB to the Trust.
This opinion is critical to the structural integrity of the Trust's securitization program. In particular, the opinion should address whether, under Delaware law and giving effect to the terms and conditions of the Sale and Servicing Agreement (as amended), the transferred receivables have been legally isolated from the bankruptcy estate of BRB such that, in the event of a bankruptcy or insolvency proceeding involving BRB under Title 11 of the United States Code or otherwise, neither BRB, a trustee in bankruptcy of BRB, nor any receiver or conservator appointed for BRB would have a legal basis to reclaim or recover the transferred receivables from the Trust.
For context, the receivables consist of small-ticket commercial equipment leases originated by BRB in the ordinary course of its equipment finance business. The underlying obligors are commercial borrowers, and the leased equipment falls primarily within the following asset categories: information technology and networking equipment, medical devices, office and copier equipment, and light industrial equipment. The Sale and Servicing Agreement provides for the transfer of each receivable by absolute and irrevocable sale and assignment, without recourse (except to the extent of certain limited representations and warranties), and contains indicia of sale, including the payment of reasonably equivalent value, the transfer of legal title, and the assumption of risk of loss by the Trust.
We understand that this opinion will be subject to certain customary assumptions and qualifications, including, without limitation, assumptions as to the factual accuracy of the representations and warranties set forth in the Sale and Servicing Agreement and compliance with the operative provisions thereof.
3(c) Enforceability. We request an opinion to the effect that each of (i) the Trust Agreement dated as of January 22, 2024 and (ii) Supplemental Indenture No. 2 dated as of April 19, 2024 constitutes a legal, valid, and binding obligation of the Trust, enforceable against the Trust in accordance with its respective terms, subject in each case to the following customary enforceability exceptions:
(i) the effect of bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent transfer, fraudulent conveyance, and other similar laws affecting or relating to the rights and remedies of creditors generally;
(ii) general principles of equity, including principles of commercial reasonableness, good faith, and fair dealing, whether applied in a proceeding at law or in equity; and
(iii) the discretion of the court before which any proceeding therefor may be brought with respect to the availability of specific performance, injunctive relief, or other equitable remedies.
This enforceability opinion should also confirm that the Trust has the requisite power, authority, and legal capacity under the DST Act and the Trust Agreement to enter into and perform its obligations under each such document. In rendering this opinion, you may assume that each such document has been duly authorized by all necessary action on the part of each party thereto (other than the Trust) and has been duly executed and delivered by each such party.
3(d) Non-Consolidation. We request an opinion to the effect that, assuming the Trust is operated in accordance with the terms of the Trust Agreement and the related Transaction Documents, and assuming the factual accuracy of the representations and warranties set forth therein, a court applying Delaware law would not disregard the separate legal existence of the Trust and would not order the substantive consolidation of the assets and liabilities of the Trust with those of BRB or any affiliate of BRB in the event of a bankruptcy, insolvency, receivership, or similar proceeding involving BRB.
This opinion is essential to the bankruptcy-remoteness of the Trust structure and is a condition to the issuance and offering of the Tap Notes. As you know, the Trust Agreement contains a number of separateness covenants designed to preserve the Trust's independent existence, including requirements that the Trust (a) maintain its own books and records separate from those of BRB and its affiliates, (b) maintain separate bank accounts, (c) refrain from commingling its assets with those of any other person or entity, (d) conduct business in its own name and hold itself out as a separate entity, (e) observe all statutory trust formalities required under the DST Act, and (f) maintain adequate capitalization and refrain from incurring indebtedness other than as contemplated by the Indenture.
We recognize that this opinion will be subject to customary qualifications and limitations, including that the opinion is rendered based on the current state of Delaware law and the factual assumptions set forth herein and in the opinion letter itself.
4. Addressees of the Opinions
The opinion letter should be addressed to each of the following:
1. Belmont Ridge Equipment Trust 2024-A, c/o Capitol Trust Services LLC, 1209 Orange Street, Wilmington, DE 19801;
2. Belmont Ridge Bank, National Association, 600 Lexington Avenue, 32nd Floor, New York, NY 10022;
3. Ashford Capital Markets LLC, 383 Madison Avenue, 22nd Floor, New York, NY 10179, in its capacity as sole bookrunner and lead underwriter; and
4. Meridian Fiduciary Services, Inc., 101 Barclay Street, 12th Floor, New York, NY 10007, in its capacities as Indenture Trustee, Paying Agent, and Note Registrar under the Indenture.
In addition, the opinion letter should expressly state that it may be relied upon by (a) Hargrove, Sato & Chen LLP, 1585 Broadway, 28th Floor, New York, NY 10036, as counsel to Ashford Capital Markets LLC in connection with the tap issuance, and (b) Calderwood & Harkness LLP, 250 Park Avenue, 40th Floor, New York, NY 10177, as issuer's counsel to the Trust and BRB.
5. Delivery Deadline
The opinion letter must be delivered no later than the Closing Date, which is currently scheduled for May 17, 2024. Delivery should be made in both executed original form (via overnight courier) and PDF form (via email) to each of the following individuals at Calderwood & Harkness LLP:
Carlos Espinoza Calderwood & Harkness LLP 250 Park Avenue, 40th Floor New York, NY 10177
Email: cespinoza@calderwoodharkness.com
Hannah Brinkley Calderwood & Harkness LLP 250 Park Avenue, 40th Floor New York, NY 10177
Email: hbrinkley@calderwoodharkness.com
In order to allow adequate time for review and comment by all parties and their respective counsel, we respectfully request that a substantially final draft of the opinion letter be circulated to us for review no later than May 10, 2024. This date was the original target closing date for the tap issuance and, given the rescheduling of the Closing Date to May 17, 2024, provides ample lead time for the review and finalization of the opinion letter. We will endeavor to consolidate and provide any comments promptly following receipt of the draft.
6. Assumptions and Qualifications
In rendering the opinions requested herein, Whitfield & Donahue may rely upon and make such customary assumptions and qualifications as are typical in opinion letters of this nature delivered by Delaware counsel, including, without limitation, the following:
(a) Whitfield & Donahue may assume the due authorization, execution, and delivery of each Transaction Document by each party thereto other than the Trust, including the due authorization by all necessary corporate, partnership, limited liability company, or other organizational action on the part of each such party;
(b) Whitfield & Donahue may rely, without independent investigation or verification, on certificates of officers of BRB and of public officials (including certificates of good standing and certified copies of organizational documents) as to factual matters that are material to the opinions requested;
(c) Customary qualifications and limitations with respect to enforceability exceptions, including the exceptions set forth in Section 3(c) above, are acceptable; and
(d) The opinions should be limited in scope to the laws of the State of Delaware (including the DST Act and other applicable Delaware statutes and the judicial decisions interpreting the same). We note that Calderwood & Harkness LLP will separately address matters of New York law applicable to the Transaction Documents and the tap issuance, and Hargrove, Sato & Chen LLP will address such matters as fall within the scope of its engagement as underwriter's counsel.
To the extent that any additional assumptions or qualifications are contemplated by Whitfield & Donahue beyond those described above, we would appreciate the opportunity to review and discuss them with you in advance of the delivery of the draft opinion letter.
7. Fee Confirmation
As discussed and agreed between our respective firms, the flat fee for the Delaware counsel opinion work described in this letter in connection with the tap issuance is $25,000. This fee covers all work related to the preparation and delivery of the opinions described herein, including the review of Transaction Documents, analysis of the legal issues underlying each opinion, preparation and finalization of the opinion letter, any customary due diligence undertaken in connection therewith, and any related consultations with our firm and with the parties.
Whitfield & Donahue should invoice the fee directly to Belmont Ridge Bank, National Association, with a courtesy copy of the invoice sent to Carlos Espinoza at Calderwood & Harkness LLP. We request that the invoice be issued upon delivery of the final executed opinion letter on the Closing Date, with payment due within thirty (30) days of the date of the invoice in accordance with Whitfield & Donahue's standard billing terms.
8. Enclosed Materials
For your convenience, enclosed with this letter please find copies of the following materials, each as described in Section 2 above:
1. Execution copy of the Trust Agreement dated as of January 22, 2024;
2. Execution copy of Supplemental Indenture No. 2 dated as of April 19, 2024;
3. Execution copy of Amendment No. 1 to the Sale and Servicing Agreement dated as of April 19, 2024;
4. Execution copy of the Underwriting Agreement dated as of April 19, 2024;
5. Copy of the Certificate of Trust for the Trust as filed with the Secretary of State of the State of Delaware;
6. Good standing certificate for the Trust from the Secretary of State of the State of Delaware (to be provided upon receipt — we have requested an expedited certificate and expect to deliver it to your office within the next several business days); and
7. Prospectus Supplement dated April 22, 2024 (filed with the SEC under Rule 424(b)(5)).
We will supplement the foregoing with any additional documents that may be required for your review, including the Base Indenture and the original Sale and Servicing Agreement, to the extent you do not already have copies of these documents on file from the original closing in January 2024.
9. Contact Information / Closing
Should you have any questions regarding the matters described in this letter, or should you require any additional documents, information, or clarifications in order to prepare the requested opinions, please do not hesitate to contact either of the following individuals at Calderwood & Harkness LLP:
Carlos Espinoza Direct: (212) 455-7842
Email: cespinoza@calderwoodharkness.com
Hannah Brinkley Direct: (212) 455-7859
Email: hbrinkley@calderwoodharkness.com
We greatly appreciate Whitfield & Donahue's assistance in connection with this matter and your firm's continued willingness to serve as special Delaware counsel in the Trust's securitization program. We look forward to working with you on this tap issuance and to receiving the draft opinion letter by May 10, 2024.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Carlos Espinoza Associate 250 Park Avenue, 40th Floor New York, NY 10177
cc:
Francesca Morano, Partner, Calderwood & Harkness LLP Samuel Eklund, Partner, Calderwood & Harkness LLP Hannah Brinkley, Associate, Calderwood & Harkness LLP Derek Ashworth, Treasurer & Head of Capital Markets, Belmont Ridge Bank, N.A. Priya Ranganathan, SVP Structured Finance, Belmont Ridge Bank, N.A. Nina Hargrove, Partner, Hargrove, Sato & Chen LLP
Enclosures (as listed in Section 8 above)