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Strategies and Drafting Techniques for Loan Workouts and Enforcement In 2022

By Richard S. Fries
February 01, 2022

This article describes a series of strategies and drafting techniques relevant to commercial real estate loan workouts and enforcement. The following is not a "how-to" primer on loan enforcement or restructuring the distressed loan. Instead this article identifies some of the current solutions and insights that have been observed, implemented and proposed during this pandemic-impacted workout cycle. These are "Real Estate Loan Enforcement Hot Tips for 2022."

Pre-Workout Agreement

Consider the article (also by this author) in the New York Law Journal (The 'Pre-Workout' Agreement in Loan Workout Negotiations (Sept. 17, 2019)) for a summary of the terms and provisions of the fairly market-standard or accepted pre-negotiation (or pre-workout) agreement. In short, by preserving in writing the status quo among the parties, that agreement is designed to: 1) protect the lender against post-default lender liability defenses and claims that purportedly arise during the course of discussions; and 2) pave the way for a risk-free negotiation, exchange of ideas, proposals and concessions and enhancements — none of which would be binding until a written agreement is approved and executed by all. (For a rather fulsome discussion of the exchange of concessions for enhancements in the distressed loan workout, see the article by this author, Exchange of Enhancements for Concessions — Insights into the Modern Loan Workout, appearing in the New York Law Journal on June 19, 2020.)

The pre-workout agreement is the borrower's "ticket for admission" to workout discussions with its counterparties. So, here's the "Hot Tip":

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