Structuring Financial Covenants, Cash Management, and Other Lender Protections in Mortgage Documents

Nonrecourse Carveouts, Leasing Provisions, Secondary Financing, Escrow Disbursement Conditions

A live 90-minute premium CLE video webinar with interactive Q&A


Wednesday, December 8, 2021 (in 1 day)

1:00pm-2:30pm EST, 10:00am-11:30am PST

or call 1-800-926-7926

This CLE webinar will consider key loan document provisions that provide borrowers flexibility and/or lender protections in times of economic uncertainty, including financial covenants, cash management provisions, additional indebtedness, and nonrecourse carveouts, as well as loan disbursement conditions.

Description

The economic fallout caused by COVID-19 presented new challenges for commercial real estate borrowers and lenders, and has impacted the initial drafting of loan documents or required modification of existing documents. Lenders might include new covenants and obligations in loan documents, while borrowers will want to negotiate for protections related to factors beyond their control.

Lenders and borrowers should consider whether relief from debt service coverage and other financial covenants will be necessary. If borrowers own properties where tenants seek rent reduction or forgiveness, borrowers should consider the impact on any financial and leasing covenants. Lockbox provisions may need to be revised to provide the lender with more flexibility in addressing tenant vacancies or DSCR triggers.

In construction loans or other loans with a future funding component, borrowers may be unable to satisfy conditions precedent to disbursement due to force majeure clauses and their inability to make continuing representations and warranties required by lenders. Current and future documents may need revision to address disbursement issues presented by the pandemic.

In light of the PPP and other CARES Act lending programs, documents may need to contemplate additional indebtedness, and whether the borrower will be entitled to loan forgiveness or to prepay the loan before the maturity of the senior debt. The COVID-19 pandemic may also force borrowers and lenders to revisit nonrecourse or "bad-boy" carveouts as well as provisions regarding springing liability for bankruptcy or insolvency.

Listen as our authoritative panel discusses financial covenants, cash management, and other lender protection provisions in real estate finance documentation.

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Outline

  1. Financial covenants: DSCR, LTV, other
  2. Construction and other loan disbursements: loan balancing conditions, force majeure
  3. Cash management: lockbox triggers
  4. Leasing covenants and occupancy requirements
  5. Reps and warranties
  6. Recourse carveouts
  7. Additional financing: PPP and Main Street Lending Programs

Benefits

The panel will review these and other documentation issues:

  • How should loan documents address commercial and retail tenant defaults?
  • What changes may be necessary to DSCR and other covenants to avoid loan defaults or cash management triggers?
  • How should loans involving future disbursements be tailored to address the current economic uncertainty?
  • What revisions should be made to subordinate financing provisions to accommodate PPP and other CARES Act financing?

Faculty

Morabito, Michael
Michael A. Morabito

Attorney
Stradley Ronon Stevens & Young

Mr. Morabito represents commercial lenders and borrowers in connection with asset-based and real estate financing. He...  |  Read More

Otero, Elena
Elena Otero

Partner
Holland & Knight

Ms. Otero primarily practices in the areas of real estate, finance and banking law, with a focus on all aspects of...  |  Read More

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You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

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