“Notwithstanding”: Financial Expression of the Day

blowhard

The corporate attorney will huff, puff, and then put you to sleep with sentences that are over a page long.  Why does he do it?

Notwithstanding,” preposition, in spite of.  Usage note:  There’s really only one type of person who uses this word in conversation:  An obnoxious prig who’s desperate to show everyone how smart he is, to wit:  “I must say, notwithstanding his B- in AP Latin, our son Ransford should probably squeak his way into Yale.”  It takes an unself-aware smart person to use this word correctly but not realize how painful it sounds.  Then again, someone who’d make the above statement just might enjoy coming across as unbearable.  One can get away with using the term more easily in print, but corporate attorneys- those who help investment bankers write registration statements, bond indentures, etc- have completely overdone it; they’ve fetishized the term.  When writing, they spit it out like a nervous tic, they use it as often as a gum-cracking Valley Girl says “like” or her twin brother says “brah.”  Here’s an example:  In First Data Corporation’s 143-page credit agreement, which is the legal document that sets forth the restrictions placed on the company by its bank lenders, “notwithstanding” appears 40 times; at one point, it shows up twice in the same sentence.

Why do the corporate shysters do it?  Why do they choose to subject readers of financial documents to such windbaggery?  When asked, Pierre Beauregard, Professor of Psychology and Director of the Lost Cause Institute at the University of the Confederacy, who has written extensively on the strange and unhealthy love-hate relationship between investment bankers and the corporate attorneys who bill them, had an interesting explanation:

Law school students like to think that business school is for the idiots who couldn’t get into law school.  But five years out, the investment banking vice president is making a lot more money than the fifth-year associate at the law firm.  Not only that, the VP’s hours are a hell of a lot better, and he gets to dump all kinds of shitwork on the lawyers.  So to reassure himself that at the very least he’s still smarter, the lawyer writes up the investment bank’s legal docs in such a way that the banker will be unable to understand them.  They’re full of embedded lists that read like false dilemmas, it’s like debating Obama.  And this tactic serves a secondary purpose:  If the docs ever become important, say the company is short on cash and it’s not clear whether the credit agreement allows additional borrowings, then the same lawyer will have to be retained at a pretty penny to parse the legalese.

If the banker- lawyer relationship isn’t twisted enough yet, then have a look at this tranquilizer-dart/riddle of a passage from the First Data credit agreement; it’s Ambien in word form:

10.1. Limitation on Indebtedness. The Borrower will not, and will not permit any of the Restricted Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, provided that the Borrower and any Restricted Subsidiary (other than a Restricted Foreign Subsidiary) may incur Indebtedness (and all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest with regard to such Indebtedness) if immediately before and after giving effect to such incurrence, (x) no Default shall have occurred and be continuing and (y) the Borrower shall be in compliance, on a Pro Forma Basis, with the Senior Secured Leverage Test, provided, further, that Restricted Subsidiaries that are not Guarantors may not incur Indebtedness pursuant to the foregoing proviso in an aggregate principal amount outstanding at any time, when combined with the total amount of Indebtedness incurred by Restricted Subsidiaries that are not Guarantors pursuant to Sections 10.1(d), (j), (k) and (n), exceeding $2,000,000,000.

Notwithstanding the foregoing, the limitations set forth in the immediately preceding paragraph shall not apply to any of the following items:

Twenty-six…yes, 26 exceptions follow for the remainder of section 10.1; they take up a synapse-exhausting five full pages.  Astoundingly, the phrase “notwithstanding the foregoing” is used a second time to introduce exception (k) (iii) (known affectionately to outrageous legal geeks as “little three in the hole”).  If you can believe it, the entire thing, beginning with the first “Notwithstanding the foregoing,” is written as a single sentence, so that there’s an “and” between exception (y) and (z).  This sentence doesn’t belong in a financial document; it belongs in the footnotes to the novel Infinite Jest, a book that gets talked about but normal people don’t read.  And just like David Foster Wallace was probably the only person who really knew what the hell Infinite Jest was about, the lawyer who wrote section 10.1 is probably the only person who knows what that means.  And you’ll have to hire him to find out.

If you hear “notwithstanding” in casual conversation, try to wrap things up quickly because you’re no doubt dealing with a Class A blowhard.  But if you read it in a credit agreement and there’s money on the line, you better call a corporate attorney- he’d like to think he’s smarter than you.

Note:  For more on the folly of financial legalese, see Sir Jams’s tremendous take on EBITDA, an earlier FEotD entry.

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3 thoughts on ““Notwithstanding”: Financial Expression of the Day

  1. Pingback: “Agnostic”: Financial Expression of the Day | Bud Fox News

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