Structuring Forbearance Agreements and Strengthening Lender Collateral Position

Crafting Deferral of Existing Defaults, Borrower Reps and Warranties, Confirmation of Liens, Releases, Agreements to Prejudgment Remedies, Ratification of Obligations, and Other Lender Protections

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

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Conducted on Wednesday, September 15, 2021

Recorded event now available

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This CLE course will equip counsel to negotiate and draft forbearance agreements that provide maximum protection of lender interests while at the same time minimizing the risk of lender liability claims. A well-structured and well drafted forbearance agreement can strengthen the lender's position should the debtor-borrower further default, file bankruptcy or seek other insolvency relief. The program will also discuss how the workout process creates opportunities to correct deficiencies in existing loan terms, shore up weak documentation, or secure additional collateral or covenants.

Description

Forbearance agreements are essential to protecting a lender's position. Counsel representing lenders must anticipate and successfully navigate obstacles during the negotiation process and avoid pitfalls that might give rise to lender liability challenges by borrowers.

A loan forbearance provides a lender the chance to strengthen its position and minimize risk due to the borrower's bankruptcy or a foreclosure sale. Forbearance agreements allow the lender to correct deficiencies in existing terms, documentation, or collateral.

Should the borrower file bankruptcy, the forbearance agreement will be reviewed by third parties, such as a court, a trustee, a creditors' committee, or others who may wish to challenge it. Thus, in any forbearance situation, counsel must structure and document the forbearance with bankruptcy considerations in mind. Waivers of the automatic stay by the Borrower and stipulations supporting relief in a bankruptcy filing are critical.

Listen as our authoritative panel of attorneys discusses best practices for crafting forbearance agreements that minimize lender risks and liabilities. The panel will also address steps lenders can take during the workout process to correct deficiencies in existing terms, documentation, or collateral.

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Outline

  1. Correcting loan documentation deficiencies and strengthening collateral position
    1. Updated UCC searches
    2. Loan document review
    3. Special collateral perfection examination
    4. Tax and judgment lien search
    5. Additional collateral
    6. Guarantees
  2. Drafting the forbearance agreement
    1. Waiver of existing defaults
    2. Borrower representations and warranties
    3. Strict compliance with loan documents
    4. The expiration date and early termination
    5. Fees
    6. Ratification of obligations
    7. Confirmation of liens and security interests
    8. Agreements to prejudgment remedies, such as receivership
    9. Release of claims
    10. Other lender protections

Benefits

The panel will review these and other high priority issues:

  • What are the critical provisions in the forbearance agreement?
  • What unique risks does the borrower's bankruptcy pose, and how can counsel minimize these risks in crafting the forbearance agreement?
  • What steps can the lender take during a loan workout to strengthen its position and minimize its bankruptcy or foreclosure sale risks?

Faculty

Cohen, Theodore
Theodore A. Cohen
Special Counsel
Sheppard Mullin

Mr. Cohen specializes in creditors' rights and focuses on lender, indenture trustee, and lessor representation...  |  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

Feld, Alan
Alan M. Feld
Partner
Sheppard Mullin

Mr. Feld is a partner in the Finance and Bankruptcy Practice Group and Real Estate, Land Use and Environmental Practice...  |  Read More

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