ARH - Aberdeen Realty Holdings - distressed debt restructuring practice

By: Aberdeen Realty Holdings  09-12-2011
Keywords: Real Estate, commercial real estate, cash flow

/ / Distressed Debt & Restructuring Practice

As a commercial real estate owner, the focus of your efforts and expertise centers around property operations, sales & marketing, positioning your asset for maximum competitiveness against your comp set and executing on your broader asset return strategy – your expertise is not, and correctly should not be, in addressing distressed debt situations. Experience in understanding both the legal and economic implications of various workout strategies is critical to ensure the appropriate options available are utilized to negotiate an outcome that is mutually beneficial for yourself and your capital partners.

Troubled assets resulting in distressed or non-performing debt can manifest themselves as a result of an owner’s limited resources (financial or operational), catastrophic events, capital markets dislocations, shift in demand generators or consumer/tenant behaviors, demographic shifts, governmental action and a host of other factors that can turn what may have been a sound investment into a significant liability.

Douglas Rohrer leads the Distressed Debt and Restructuring Practice and as a former structured real estate finance banker with Credit Suisse and prior to that, a real estate finance attorney representing Wall Street’s leading investment banks and other institutional lenders, ARH can provide the borrower critical analysis from the lender’s legal and financial perspective. ARH can independently and proactively analyze your troubled asset situation, offering solutions and becoming your advocate can mean the difference between keeping your asset, and losing it.

Loan Servicer Negotiations and Loan Restructuring Services May Include:

  • Preparing the required financial reporting materials for presentation to the loan servicer consistent with your loan document’s requirements (your P&L for tax reporting purposes will be materially different from the P&L to be submitted to your lender)
  • Conducting a current re-underwriting analysis, DSCR and Debt Yield test and serving as a liaison with the lender or servicer in ensuring that their review and underwriting is correct, consistent with applicable standards and is not manipulated to allow the lender to take control of your property cash flow through implementation of cash traps/sweeps
  • Obtaining loan servicer compliance with cash management waterfall provisions, escrow reserve and release conditions, including determination of whether reserve caps, calculations, phase in/out provisions and other hurdles or milestones are being correctly administered
  • Developing sophisticated economic analysis of loan modifications’ impact on loan NPV in connection with restructuring existing loan terms. Your advisor must understand how the lender or servicer evaluates modifications, workout and restructuring proposals from both an economic and legal perspective otherwise a borrower is wasting their money on advisory fees.
  • Negotiating waiver of accumulated, default interest, penalties & fees
  • Forbearance of covenant requirements
  • Collateral substitutions and/or incorporation of other credit support strategies into workout plan
  • Recapitalization strategies involving the incorporation of Mezzanine, Preferred Equity, Finance Leases or other senior/subordinate debt
  • Extension of a loan at maturity or which fails an imbedded extension test
  • Formulation of alternative workout strategies on non-performing or sub-performing loans including arranging note sales, carving off B-Notes to sell and delever senior position, arranging new equity infusions in return for partial lender COD, etc.
  • Creative exit strategies that reduce or eliminate exposure for full recourse borrowers

Keywords: cash flow, commercial real estate, Loan Servicer, Real Estate,

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