Structuring Real Estate Loan Covenants, Events of Default Provisions, and Representations and Warranties

Negotiating Agreement Provisions to Maximize Borrower Protection and Lender Remedies

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

Conducted on Wednesday, May 11, 2016

Recorded event now available

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Program Materials

This CLE webinar will provide borrowers’ and lenders’ counsel with a review of loan documentation recent trends and best practices for structuring covenants and event-of-default provisions as well as representations and warranties provisions in commercial real estate loans.

Description

Strategically crafted loan covenants and default provisions can give flexibility to the borrower and adequate protections and remedies for the lender. Carefully structured loan provisions can minimize disputes between the parties and reduce the risk of suit.

Default clauses must be carefully constructed to distinguish between a default and an event of default. Grace periods and the ability to cure defaults are particularly important to borrowers. Finally, the MAC clause, a common provision in real estate loan documents, is critical to both borrowers and lenders.

The covenants are often among the most negotiated provisions in a loan transaction. Financial covenants in real estate investment finance deals are more tightly monitored and defined in the current market than prior to the financial crisis.

Although property aspects of representations and warranties will vary among transactions, there are standard representations found in most facility agreements. There are also standard limitations that borrowers seek to negotiate regarding the scope of representations.

Listen as our authoritative panel of real estate finance attorneys offers effective approaches for borrowers’ and lenders’ counsel for structuring loan covenants, event-of-default provisions, and representations and warranties.

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Outline

  1. Loan covenants
    1. Affirmative
    2. Negative
    3. Financial
    4. Other covenants
  2. Default provisions
    1. Cross-default
    2. Insolvency-related events
    3. Change of control
    4. Material adverse change
    5. Change in business
  3. Reps and warranties
    1. Title to property
    2. No breach of applicable laws relating to property
    3. Security over property
    4. Use and condition of the property
    5. Development activities for development facilities

Benefits

The panel will review these and other key issues:

  • What are borrowers’ and lenders’ best tactics for proactively mitigating risk when negotiating and drafting financial covenants?
  • What financial covenants are lenders particularly insistent upon?
  • How can the borrower and lender each minimize risk when drafting or relying on default provisions?
  • What are the standard property representations found in most facility agreements and what limitations do borrowers typically seek with respect to representations?

Faculty

Mairi V. Luce
Mairi V. Luce
Partner
Duane Morris

Ms. Luce focuses her practice on reorganization, bankruptcy law, creditors' rights, out of court workouts and...  |  Read More

Christopher W. Rosenbleeth, Esq.
Christopher W. Rosenbleeth, Esq.
Partner
Stradley Ronon Stevens & Young

Mr. Rosenbleeth regularly represents banks and other financial institutions, corporate clients and strategic investors...  |  Read More

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