DEBT DISRUPTION: REAL ESTATE DEBT MARKETS ROIL FROM CORONAVIRUS MEASURES

Lenders and borrowers are experiencing unprecedented challenges with existing loans and prospective financing activity as a result of measures being taken to slow the coronavirus. Loan defaults are escalating, lending institutions are defaulting on funding obligations, and governmental orders are restricting enforcement, foreclosure and other protective activities across several jurisdictions. Particularly hard hit are the hospitality, retail and office sectors.

Arcturus is actively working with senior and subordinated real estate lenders (banks, life insurance companies and private debt funds), as well as public and private borrowers, to help identify problems, assess risks and implement strategies to help reduce the impact of these unprecedented pressures on their real estate investments.

KEY LOAN ISSUES TO BE CONSIDERING TODAY

Lender considerations include:

  • Loan compliance (interest, debt service coverage, loan covenants, reporting, etc.)
  • Borrower communication
  • Loan classification analysis
  • Evaluation of enforcement alternatives (forbearance, cash flow sweeps, guarantees, foreclosure, deed-in-lieu)
  • Impact of force majeure, material adverse change, impossibility, frustration of purpose and other legal provisions
  • Loan modification/restructuring alternatives
  • Underwriting and collateral revaluation
  • OREO/asset management (staffing, operating plan and value recovery strategies)
  • Lender liability risk

Borrower considerations include:

  • Business plan assessment/reforecasting
  • Covenant compliance
  • Asset and collateral revaluation
  • Operating strategies (leasing, expenses management, capital investing)
  • Liquidity and alternative financing sources
  • Cash management/preservation
  • Guarantees and credit support exposure
  • Lender communication/negotiations
  • Loan restructuring, deed in lieu and bankruptcy

Arcturus understands the critical issues facing lenders and borrowers caused by today’s unique environment. We have a strong team, with deep experience in helping clients get a clear understanding of their unique situation, outline alternatives and strategies to address loan-related problems, resolve conflicts and restructure obligations to preserve/create value.

Please contact Arcturus so we can help your business maximize its ability to weather the storm during this challenging time and be best positioned for future success.