Pre-Bankruptcy Planning for Troubled Lending Facilities: Workout Strategies for Maximizing Recovery

Recording of a 90-minute CLE video webinar with Q&A

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Conducted on Wednesday, February 9, 2022

Recorded event now available

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Course Materials

This CLE course will guide commercial lenders and their counsel on confronting a defaulted or troubled loan. The panel will discuss workout options and will outline steps for lenders when anticipating a borrower's potential bankruptcy.

Description

Even if the actual number of bankruptcy filings declined in 2021, the number of distressed financings has not. To maximize the recovery of distressed loans, lenders must evaluate outstanding loans for the first sign of trouble and prepare pre-bankruptcy tactics to protect the lender's rights and interests.

Each borrower's circumstances are unique, so lenders can't formulate a uniform recovery strategy with all borrowers. Our panel will review and discuss best practices for loan workouts and when a potential bankruptcy looms.

Listen as our panel of finance attorneys explains steps commercial lenders should take when confronting a troubled loan and effective pre-bankruptcy planning strategies.

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Outline

  1. Triage for financially distressed companies: a secured lender's perspective
    1. Examine documentation and collateral perfection
    2. Audit inventory, accounts receivable, and equipment to determine borrowing base issues
    3. Review cash flow budgets and projections at least monthly
    4. Head in the sand
    5. Retention of experienced workout consultants
  2. Documenting a workout solution
    1. Obtain guarantees, letters of credit, other credit support
    2. Forbearance agreements
    3. Reservation of rights
    4. Resolving preference issues
  3. Pre-bankruptcy strategies
    1. Collateral sales options
    2. Alternatives of a debtor
    3. Actions in workouts that lead to potential preference issues
    4. Tight drafting of intercreditor agreements and agreements among lenders for enforcement in bankruptcy cases
    5. Relaxing financial covenants
    6. Avoiding "course of dealing" issues

Benefits

The panel will review these and other key issues:

  • What are a lender's options when dealing with a commercial borrower on the verge of default?
  • What are some strategies and tactics lenders may employ to maximize recovery of the loan principal, interest, and fees, pre-bankruptcy?
  • How can lenders minimize liability concerns stemming from "course of dealing" issues?

Faculty

Lipke, Douglas
Douglas J. Lipke
Shareholder
Vedder Price

Mr. Lipke is Co-Chair of the firm’s Insolvency, Bankruptcy and Corporate Reorganization Group. He concentrates...  |  Read More

Dickey, Allen
Allen J. Dickey
Partner
Faegre Drinker Biddle & Reath

Mr. Dickey is a real estate and finance attorney who advises real estate funds, opportunity funds, real estate...  |  Read More

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