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Your company just received an unexpected phone call from an attorney at the Department of Justice. The attorney informed you that the government has been investigating your company for violating a federal statute and intends to file formal criminal charges later that morning.  Immediately after the call, the board of directors is notified and a meeting scheduled with senior managers to discuss the situation. As the company’s general counsel, you immediately start sketching out a legal to-do list: engaging external counsel, gauging the company’s legal exposure, formulating a litigation strategy, identifying employees involved in the conduct and other issues.

If your company has outstanding debt, there is one other key issue that needs to be considered: the potential impact of the DOJ case and any related civil litigation on the company’s debt arrangements and debt financing strategy going forward. A federal investigation can raise a variety of compliance issues under credit agreements and indentures. For companies with upcoming debt maturities or needs for additional capital, a looming DOJ investigation, with the threat of large fines and potential follow-up civil litigation, can add significant complications to the refinancing process or new debt raising efforts.

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