Facts:

A Hong Kong real estate development company, eager to commence a large-scale project that spans both Hong Kong and Mainland China, has approached a consortium of international banks to secure a cross-border syndicated loan. The proposed facility is intended to finance the acquisition of land, cover construction costs, and manage ongoing development expenses across multiple jurisdictions. Although the Borrower is established in Hong Kong, some of its business interests and subsidiaries operate in Mainland China. These subsidiaries are expected to guarantee the loan alongside the Borrower. Members of the lending group have expressed reservations about the Borrower’s significant existing debts and its past regulatory infractions arising in Mainland China, particularly regarding strict local requirements that may not mirror the more familiar considerations in Hong Kong. The entire transaction could trigger regulatory reviews, calling for approvals from the Hong Kong Monetary Authority and possibly from Mainland Chinese authorities to ensure compliance on both sides of the border.

One delicate aspect lies in aligning cross-border guarantees and potential security packages—such as mortgages over Hong Kong or Mainland real estate and share pledges in overseas holding companies—to ensure they remain enforceable if the Borrower defaults. The Borrower’s heavily leveraged balance sheet raises the possibility that this new loan might breach existing covenants or conflict with other obligations. Divergent regulatory standards further complicate matters, given that Mainland authorities may have a different stance on foreign lending and cross-border collateral than Hong Kong’s regulators. The Lenders must also observe prudential standards for large exposures, which could be influenced by the Borrower’s growing debt profile. The viability of these arrangements and the long-term success of the project depend on whether the parties can arrange a sophisticated structure that satisfies dual-jurisdiction requirements while simultaneously offering sufficient protection to the Lenders.

Question:

Identify the critical legal, regulatory, and structuring concerns that the Borrower and the Lenders need to address when putting together this cross-border syndicated facility, and suggest how these various risks might be effectively managed or mitigated.